Mutual funds suffered a second straight month of losses in April, according to preliminary data from Morningstar Canada.

The company said 22 of the 32 Morningstar Canada Fund Indices posted negative returns during the month.

April’s bright spots were provided by the Morningstar Canada Healthcare Fund Index, up 5.7%, and the European Equity fund index, up 3.1%. Global Equity and International Equity (which invest outside Canada and the U.S.) also put in respectable performances, up 2.1% and 2.0% respectively.

Healthcare funds profited from a major corporate merger, an exciting announcement and strong first-quarter earnings in the pharmaceutical industry, said Morningstar Canada analyst Mark Chow, in a news release.

“Drug-maker Aventis agreed to a proposed takeover worth US$65 billion by smaller French rival Sanofi,” Chow said. Meanwhile, OSI Pharma announced positive results from a lung-cancer- treatment drug, which boosted shares of OSI Pharma and its partners Genentech and Roche. And earnings from Pfizer, Schering, Bristol Myers, Eli Lilly, Imclone and several firms exceeded the Street’s expectations.”

European Equity bounced back from a March that included the Madrid bombings and poor economic and earnings news, Chow said. “The Euro has also weakened against the U.S. dollar, nearing a five-month low, which has aided European exporters,” Chow said.

At the losing end of the fund market, Precious Metals, March’s second best performer, crashed to the bottom of the Morningstar Fund Index list in April with a loss of 17.2%. The month’s second worst performer was Latin American Equity at -7.7%, followed by Canadian Income Trusts at 5.5%.

Precious Metals funds were pummelled by a 10% drop in the price of gold, Chow said. “Much stronger employment numbers finally arrived to help confirm the U.S. economy’s recovery,” he said. “This in turn pushed up the U.S. dollar versus many of the major world currencies including the Canadian dollar.”

Funds in the various Canadian equity fund categories fell on news of accounting improprieties and “for cause” firings of three top executives at Canadian market darling Nortel weighed heavily on domestic markets. The Morningstar Canadian Equity (Pure) Fund Index fell 3.6% in April, while the broader Canadian Equity fund index, which includes funds that take advantage of the 30% foreign content limit for RRSP and pension investments, was less hard hit, falling 1.9% on the month.

Healthier markets on Wall Street propelled U.S. equity funds, as the Morningstar Canada U.S. Equity Fund Index gained 1.6% and U.S. Small Cap Equity fund index rose 1.3%.

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.

http://www.newswire.ca/en/releases/archive/May2004/04/c8453.html