More than two-thirds of mutual fund sectors gained ground in October, a Morningstar survey of Canadian mutual fund performance shows.

Overall 22 of the 32 Morningstar Fund Indices landed in positive territory, but October brought bad news for investors in precious metals and Japanese equities. Precious metals was the worst performing index and fell 10%. Japanese equities (-8.1%) and Asia Pacific Rim equities (-3.2%) rounded out the bottom three.

The science and technology fund index led all 32 Morningstar indices with a gain of 13.2% during October. Technology also benefited the U.S. equity index. Its 5.9% surge was driven by strong gains in the majority of the 10 top stock positions held by managers in the category. “U.S. stocks, particularly in the technology sector, drove performance this month,” said Morningstar analyst Iain Giles. “October’s advance reclaimed a little bit of territory that investors lost in these hard hit fund categories through this bear market cycle.”

At October 31, the top U.S. equity fund holding was Microsoft Corp., which rallied 22% in October. The fifth-largest holding, Citigroup Inc., rocketed up 25%. “Fund managers responded differently to these two surging companies, however,” added Giles. “They slightly increased exposure to Microsoft from September to October. At the same time, they took profits from the surging Citigroup by reducing holdings modestly.”

While the U.S. fund index was up nearly 6%, the Canadian equity fund index gained only 1.3%. Four of the 10 most widely held stocks in this category lost value in October. The best performer, Thomson Corp., gained 10%.

Mackenzie Financial Corp. still boasts the most five-star funds. It added three more in October bringing its total to 27. The large gap between first and second place was all but eliminated by CI Mutual Funds Inc. Its acquisition of Clarica, Spectrum and Sun Life funds boosted its total from 12 to 24 top-rated funds. Clarica had been tied for the number three spot prior to its incorporation into CI.

Rounding out the top five companies holding five-star funds were AIM Funds Management Inc. with 11, Franklin Templeton Investments Corp. with eight and Investors Group, Great-West Life Assurance Co. and Manufacturers Life Insurance Co. tied with six funds apiece.

For companies with at least three top rated funds, on a percentage basis I.A. Michaels Investment Counsel continues its run of perfection. It maintained a five star rating on all three of its rated funds. Howson Tattersall Investment Counsel slipped slightly as one of its five-star funds dropped to four stars. It remains in second with half of its ratings-eligible funds maintaining five star status. Rounding out the top five were Mawer Investment Management (44%), McLean Budden Ltd. (43%), and Beutel Goodman & Company Ltd. and Burgeonvest Securities Ltd. tied with 33%.

Seven funds qualified for the top rating in their first eligible period. AIM Funds Management’s Trimark brand secured four of them. Four others moved up from four-star status to achieve five-star status for the very first time. Overall, 210 funds qualified for five-star status in October.