Surging oil prices, as well as strength in commodities and the Canadian dollar, rewarded investors in natural resources investment funds in June. The Morningstar Canada natural resources fund index rose 7.3% during the month, followed by the precious metals fund index at 7.2%.

These factors helped buoy most Canadian-asset funds, and all five Canadian equity fund categories posted one-month returns in excess of 2%.

Twenty-two of the 31 Morningstar Canada fund indices posted gains during June; the money losers were all in foreign markets, with science and technology bringing up the rear with a loss of 3.2%.

“The strength in the commodities sectors as well as a strong Canadian dollar helped many of the Canadian-centric funds outperform foreign funds,” says Morningstar Canada analyst Mark Chow.

“Crude oil passed the US$60 a barrel mark in late June, amid concerns over supply disruptions and worldwide refining capacity,” Chow explains.

Precious metals funds were driven by a jump in the price of gold above US$440 an ounce in mid-June. However, Morningstar Canada says this fund index remains 2005’s worst performer, losing 5.2% during the first half of the year.

Domestic equity funds were driven by a strong Canadian dollar, which rose against all major currencies during the month, Chow says. “The S&P/TSX Composite Index moved into five-digit territory for the first time in nearly five years, on the back of oil’s surge and strong retail-store sales, as well as an encouraging interest-rate outlook from the Bank of Canada,” he says.

The Canadian equity (pure) and Canadian income trust fund indices each rose 3% in June.

The sci-tech fund index returned to the dungeon after being May’s top performer at 6.7%. The category was hauled down by Canadian technology stocks, such as Research in Motion Ltd., ATI Technologies Inc. and Cognos Inc., which had a dismal month while stocks in most other Canadian sectors boomed.

Canadian fixed-income and balanced funds also fared well in June. The new Canadian income balanced fund index rose 1.8% during the month, while Canadian asset allocation gained 1.7%. Canadian balanced and Canadian bond rose 1.4% and 1.2% respectively.

Among the few foreign-based fund indices to post gains in June were emerging markets equity, up 1.1%; U.S. small and mid cap equity, up 0.9%; and global balanced and asset allocation, up 0.3%.

Final performance figures will be published at mid-month.