Canadian mutual fund investors enjoyed a fourth straight month of positive returns in July according to Morningstar Canada.

Funds focused on Asian equities led the way again last month as 90% of funds overall made money during the one- month period ended July 31, 2003. Funds invested in gold and precious metals and in emerging markets also had a good month.

During July, 27 of the 32 Morningstar Canada Fund Indices produced positive one-month returns, building on the broad gains of the previous month. Longer term, July was the first month of 2003 in which the majority of fund indices posted one-year returns in the black. Twenty-three fund indices were in positive territory for the year ended July 31.

“July’s gains resulted from strong equity market returns around the world, notably in the U.S. market, combined with a weakening Canadian dollar,” said Gareth Tingling, Morningstar Canada’s manager of fund research.

“Most major equities markets ended the month with gains in the high single digits, a result of generally improving economic indicators in the U.S. and second-quarter earnings that largely delivered on analysts’ and investors’ expectations.”

The Canadian dollar depreciated against most major currencies during July, including a 4% fall against the U.S. dollar, 3% against the yen, the euro and the Mexican peso, and 2% against the British pound. “This weakness helped foreign equity fund indices to edge out the Canadian categories,” Tingling said.

The Asia Ex-Japan Equity Fund Index was July’s top performing fund index, with a return of 10.5%. The Precious Metals Fund Index was second best, with a gain of 10.1%, and the Asia Pacific Rim Equity Fund Index was third, moving up 9.2%.

July’s gains pushed the two Asian fund indices into the black on a year-to-date basis. Asia Ex-Japan Equity was up 3% during the first seven months of 2003, while Asia Pacific Rim Equity gained 1.6%. However, Japanese Equity was still in the red, down 3.8% year to date.

The majority of the worst performing fund indices for the month consisted of fixed income or money market funds. The Canadian Bond Fund Index was the worst performer for the month, with a loss of 1.4%. Canadian Bond and Foreign Bond tied for the second-worst performance at -0.3%, and the third-worst performance was Canadian Mortgage, which lost 0.1%. These were the only fund indices with negative returns for the month.

July marked the introduction of a new category, Canadian Equity (Pure), which consists of funds that have at least 95% of their non-cash assets in Canadian stocks. Consistent with the S&P/TSX Composite Index’s 4% return during July, the newly minted Canadian Equity (Pure) Fund Index gained 3.7%.

Among other key fund indices, Canadian Equity was up 3.8% and Canadian Dividend 2.2%. Canadian Balanced gained 1.9% while Canadian Money Market was basically flat at 0.2%. Global Equity rose 6.3% while U.S. Equity was up 5.2%.

Mackenzie Financial Corp. continued to have the most funds with a five-star Morningstar Rating, with 27 funds, followed by CI Mutual Funds with 21. Excluding clone funds (those that duplicate the performance of another fund but have a tax-advantaged structure or come packaged with some additional features), Mackenzie remains the leader with the most five-star funds (12), followed by AIM Trimark Investments and CI with nine and eight five-star funds respectively on this basis.