Mutual funds resumed their profitability streak in October, shaking off a stall in September that interrupted a five-month stretch of broad-based gains, according to Morningstar Canada’s monthly survey of fund performance.

Strong gains across almost all major stock markets drove 88% of funds into the black during October. Of more than 4,800 funds sold in Canada, approximately 87% were profitable on a year-to-date basis through October 31.

In October, 27 of 32 Morningstar Canada Fund Indices were in positive territory, compared with just 11 the previous month. Once again, the top return was posted by the Precious Metals Fund Index, which gained 15.3% for the month. It was the third straight month that this group was the No. 1 performer.

“At Morningstar we have almost run out of puns for describing Precious Metals fund index performance,” said Gareth Tingling, Morningstar Canada’s Manager of Fund Research. “The reason is the total domination of the leader board by this fund index, which is the best-performing on just about any basis one cares to apply, whether for the month, year-to-date, or any annualized rate of return for a period of up to six years.”

However, Tingling cautions investors to be wary of the sector’s golden lure. “While there is no doubt this sector has been a stellar performer over the past three years, if you look further back in time, there are very few funds with longer term track records.”

The Precious Metals fund index was also the top performer on a year-to-date basis, up 36.8% through October 31. October’s second-best performer was Science and Technology, up 6.6%, followed by Canadian Small Cap Equity, which gained 5.9%, lagging the S&P/TSX Small Cap Index’s 7.4% one-month return.

Fixed-income funds again took a beating in October, with the losses led by the Foreign Bond Fund Index, off 2.2% during October. Next worst was the Canadian Bond index, down 0.9%. The other three indices in negative territory were U.S. Small Cap Equity (-0.6%), Canadian Short Term Bond (-0.5%) and Canadian Mortgage (-0.2%).

Among the largest indices in terms of total assets, Canadian Equity gained 4.7% in October, recovering from a 1.3% loss in September. Canadian Dividend was up 4% during the month and Canadian Balanced gained 2.3%. Global Equity enjoyed a 3.6% return and International Equity did even better, up 4.5%.

Mackenzie Financial Corp. maintained its lead among Canadian mutual fund companies with the most funds rated five stars by Morningstar in October. Mackenzie had 10 funds with the top ranking at October 31, the same as in September. The figures exclude clone funds, those that duplicate the performance of another fund but have a tax-advantaged structure or come packaged with some additional features. Including clones, Mackenzie had 24 five-star funds, also good enough for top spot in the five-star stakes, but one less than at the end of September.

Acuity Funds Ltd. jumped to second place in the five-star-fund rankings with nine top-rated funds, up from five in September. AIM Trimark Investments was third, with eight five-star funds, while three firms were tied for fourth with six: Franklin Templeton Investments Corp., Investors Group and TD Mutual Funds.

Including clones, the top five companies were Mackenzie, with 24 five-star funds; AIM Trimark and CI, each with 15; TD with 11; and Acuity and Franklin Templeton each with nine.

http://www.newswire.ca/en/releases/archive/November2003/14/c2061.html