Canadian mutual funds had their best month in October since the spring, according to performance numbers compiled by Morningstar Canada.

Morningstar says that its latest numbers show that only four of 34 fund categories posted negative median monthly rates of return, with none among the negative performing groups losing even 1%.

Among the winners, five categories posted median monthly returns of 6% or better, led by Science and Technology funds with 15.4% median return.

Sci/Tech was the worst performing category in September, down 19.3%. Its year-to-date return is negative 43.9%.

October’s numbers were a dramatic reversal of September’s disastrous results, as investor panic following the Sept. 11 attacks took a toll on equity markets. As a result, all but eight fund categories produced negative returns in September.

“While it may be too soon to say that the months and months of economic and financial troubles are at an end, it seems that September may have provided an inflection point from which to mark the recovery,” said Mark Warywoda, Morningstar Canada senior analyst.

“Most major global markets bottomed out on Sept. 21, setting the stage for an October rally. Clearly economic weakness will persist at least in the short-term, but equity markets are forward-looking mechanisms, and what October’s market returns indicate is that investors are betting that 2002 will bring better days.”

Warywoda said investors should be cautious not to get too excited about October’s fund numbers. “We should recall that they were built on a foundation that was extremely weak,” he said. “September marked a distressing end to an already dismal quarter, so there were plenty of buys to be had in the stock markets.”

Among other top performing categories in October were Natural Resources, with a one-month median return of 7.6%; Emerging Markets, up 7%, U.S. Small and Mid Cap Equity, up 6.5%, and Asian Ex-Japan Equity, up 6%.

October’s worst one-month performer was the Precious Metals category, down 0.7%, compared with its top- ranked 4.9% median return in September. However, this volatile category remains 2001’s top performer, with a 19.9% median year-to-date return at Oct. 31.

A total of 164 funds earned Morningstar’s Five Star Rating as of Oct. 31.

Mackenzie Financial Corp. solidified its position in the top spot among fund companies ranked by number of Five-Star funds. It now has 12. AIM Funds Management Inc. climbed into second spot, with eight Five-Star funds. Franklin Templeton Investments Corp. ranked third, with seven Five-Star funds.