Mutual funds snapped a long winning streak in March, suffering their worst month of performance in a year, according to preliminary data from Morningstar Canada.

Morningstar said 21 of its 32 indices posted negative returns in March. This is in stark contrast to February, when all of the fund indices made gains during the month.

It was the worst month of fund performance since March 2003, when 26 fund indices were in negative territory.

The big exception in March was the Japanese Equity Fund Index, which soared 11.6% during the month.

Japanese funds benefited from a gain of 8.6% (in Canadian dollars) by Tokyo’s Nikkei average in March. “Japanese stocks have surged in recent months on the back of improving economic conditions and investor sentiment,” said Morningstar Canada senior analyst David O’Leary, in a release.

A distant second was the Precious Metals Fund Index, with a 3.3% one-month return.

The other nine fund indices in positive territory each produced returns of less than 1%, led by the Canadian Income Trust Fund Index at 0.8%.

The worst performing index in March was European Equity, which lost 4.9%, followed by Science & Technology at -4.2% and Asia Ex-Japan Equity at -4%. While the Science & Technology index continued its bottom-of-the-pack performance from February, European Equity and Asia Ex- Japan Equity tumbled from rankings that were near the top a month ago.

For the first quarter, Japanese Equity also was the top performing index, gaining 16.7% during the first three months of 2004. Second best was Latin American Equity, up 10.4%. The quarter’s worst performer was Precious Metals, which lost 3.5%.