Mutual fund performance improved slightly in June, by Japanese equity funds according to preliminary data from Morningstar Canada.

The Japanese Equity index, which rebounded from its bottom-ranked performance in May, traded places with the Precious Metals index, which plummeted to last place among the 32 Morningstar Canada fund indices.

Overall, 21 indices posted positive returns during June, an improvement over May when 18 indices gained ground.

“Fund investors weathered another volatile month amid an imminent interest-rate hike in the U.S. and persistent geopolitical instability,” said Morningstar analyst Mark Chow, in a news release. “High oil prices did not dominate the news in June as increased supply caused the price of crude to ease.”

The Japanese Equity index, gained 3.6%, followed closely by Canadian income trusts, up 2.9%. Despite up-and-down performance during the first half of this year, Japanese funds yielded by far the best return (15.9%) of all the fund indices year-to-date at June 30.

“Japanese equities shrugged off the possibility of a slowdown in China, inflationary concerns in the U.S. and some uncertainty in the world oil supply,” Chow said.

The Canadian income trusts index recovered from a 5.5% loss in April and a flat performance in May to post a solid 2.9% return in June. After a few years of relatively strong performance, income trusts have found less appeal in what appears to be an environment of rising interest rates, Chow said. “Bond yields compete with yields offered by trusts. This sector may continue to struggle as rates have begun to rise.”

The Precious Metals index lost 4.9% in June, continuing its volatile ride in 2004. It has bounced from best to worst and back in the monthly performance rankings since April.

Morningstar releases preliminary fund performance figures at the beginning of the month. The preliminary numbers are based on the change in funds’ net asset values per share during the month, and do not necessarily include end-of-month income distributions such as dividends, interest or capital gains. Final performance figures will be published at mid-month.