A dismal showing by resource stocks sent precious metals and natural resources investments funds tumbling during April. The poor showing by resource shares also weighed on domestic equity funds.

Overall, however, April was a better month for fund investors than March, as 20 of the 32 Morningstar Canada Fund Indices posted positive returns. Twenty-nine fund indices were in the red during March.

The month’s top performer was the Healthcare fund index, which soared 5.5%. Next best was the Foreign Bond fund index, up 4.2%, as funds focused on foreign securities benefited from a fall in the value of the Canadian dollar. Asian funds all fared well, led by Asia ex-Japan Equity, up 3.0%.

The Bank of Canada’s reluctance to hike interest rates, coupled with uncertainty over the Martin government’s future, hurt the Canadian dollar, said Morningstar Canada analyst Brian O’Neill.

Without the exchange-rate advantage, most of the foreign equity categories would have been in negative territory. The Global Equity fund index eked out a 0.8% return, while International Equity barely broke even, at 0.1%. U.S. Equity gained just 0.6%.

“Stock market indices all over the globe ended the month in negative territory after a brutal second week that left almost none of them unscathed,” O’Neill said. “That week, fears of an economic slowdown and rising inflation in the U.S. sent downbeat reverberations through international markets.”

The broad Canadian Equity fund index, which averages about 13% foreign content, lost 1.9% in April, while Canadian Equity (Pure) lost 2.3%. Canadian Small Cap Equity fared even worse, dropping 4.2%. The TSX’s energy and materials sub-indices, where most Canadian resource stocks reside, together account for nearly 40% of the S&P/TSX Composite Index’s market capitalization.

“The recent faltering of the resource sectors was a key contributor to Canadian equity weakness overall. Oil slipped below US$50 a barrel from US$58, and base metals prices were soft,” O’Neill said.

The Natural Resource fund index remained the top performer on a year-to- date basis, however, up 5.4%, followed by Asia ex-Japan, up 3%. The Precious Metals fund index is at the bottom of the year-to-date heap, down 12%.