Dismal performance during the first quarter has pushed most equity mutual funds deeper into the red. Overall, nine out of 10 funds lost money for their investors according to Morningstar’s survey of more than 4,500 mutual funds.

Only six of 32 Morningstar indices came out ahead during the quarter.

“The first quarter has been horrible for equity investors,” says Morningstar analyst Raju Khatra. While the war in Iraq boosted U.S. equity markets for March, it wasn’t able to repair the damage done to fund returns earlier in the quarter.

The Morningstar U.S. Equity Fund Index is down 8.9% since the beginning of the year. “U.S. economic data deteriorated sharply in March, casting some doubt as to prospects for the U.S. economy as the war draws to a close,” said Khatra.

Canadian equity funds fared slightly better losing 5.7% since January. The biggest losses were beyond North America.

“Most funds in the international equity categories have fared even worse than their U.S. or Canadian counterparts. Leading the losses have been the International Equity and European Equity Fund Indices. They have lost 16.5% and 14.8% respectively for the quarter. Things haven’t been much better in the Far East or the emerging markets.”

“Gold had been one refuge for investors, but that also lost its lustre last quarter,” said Khatra. That index is down 14.8% since January. On the bright side, the Precious Metal Index is still at the top for the last one and two year periods.”

The Canadian Income Trust Fund Index led the pack for the first quarter at 1.6%, followed by the High Yield Bond Fund Index at 1.3%, the Real Estate Fund Index at 0.6%, the Canadian Money Market Fund Index at 0.5%, the Canadian Mortgage Fund Index at 0.2% and the U.S. Money Market Index at 0.1%.

The Canadian Balanced Fund Index lost 4.2%. The Canadian Bond Fund Index lost 0.4%.

Mackenzie Financial Corp. now has the most five-star funds with 27 as of the end of March. Howson Tattersall Investment Counsel joins I.A. Michael Investment Counsel in the 100% club for sponsors with at least three rated funds. All four of the rated Howson Tattersall funds now have five stars while I.A. Michael is three for three.