Canadian mutual fund values plummetted along with the stock markets last month. Performance numbers compiled by Morningstar Canada is showing that the investor panic following the Sept. 11 terrorist attacks brought on double-digit negative returns for September.

For the fourth straight month, more funds lost money than gained. Of the roughly 4,000 funds tracked by Morningstar Canada, nearly 3,300 lost money in September. Only 660 funds managed gains, and nearly a third of these were money market funds, with modest returns tied to treasury-bill rates. The median fund lost 6% during the month, meaning that half of all funds in Canada fared better and half fared even worse.

Virtually every equity-fund category lost money in September. Science and Technology funds were hardest hit. The category’s median return was a loss of 19.3%. The median Canadian equity fund return was -7%. For U.S. equity it was – 6.8%, and for international equity there was a loss of 10.3%. Precious metals funds were in positive territory in September, with a 4.9% return. Gold has traditionally been sought as a haven in troubled times.

Bond funds managed to preserve investors’ capital, as most of these funds managed to stay in the black during September.

Hedge funds also kept investors out of the red, as indicated by the 0.7% median return for alternative strategies funds – a new category introduced last month by the fund-tracking industry. But these funds are known for volatile performance. Returns for funds in this small group ranged from 11.9% for Dynamic Equity Hedge to -12.1% for iPerform Silicon Valley.

Among the 243 funds that had their Morningstar Star Ratings revised in September, three were elevated by two stars: QSA Canadian Equity Class A (to a rating of five stars), Friedberg Toronto Trust International Securities and London Life Growth Equity (to four stars). One fund, London Life Balanced, fell by two stars, to a rating of three stars. Eleven funds advanced to a Five Star Rating from four. But 13 funds fell to one star
ratings from two.

Twenty-two funds were rated for the first time, including four that received five stars in their initial eligible period: Fidelity Canadian Balanced, Fidelity Disciplined Equity, Templeton Mutual Beacon GIF and Keystone Investment Long-Term Growth.

CI Mutual Funds Inc. was knocked from the top spot in terms of highest number of Five Star funds. Mackenzie Financial Corp. took that honor for September as it now has nine Five Star funds, up from seven, whereas CI’s tally fell to six from eight. Great-West Life Assurance Co. and Franklin Templeton Investments Corp. each have seven top-ranked funds. A total of 155 funds had Five Star ratings at Sept. 30.