Foreign equity funds shine in January

Foreign equity funds continue to outperform their Canadian-focused counterparts, according to data released today by Morningstar Canada.

The U.S. stock market had an exceptionally good month in January, with the S&P 500 Index gaining 5.2%. Coupled with favourable currency effects, this translated into an average gain of 5.6% for funds in the U.S. Equity category, and 5.8% for the U.S. Small/Mid Cap Equity category.

Read: Look beyond the Canadian border: AGF

Major European and Asian markets also had a good month, leading to strong increases for the European Equity (4.6%), International Equity (4.6%), Global Equity (4.5%), and Japanese Equity (3.9%) fund indices.

Canadian equities continued to post strong gains in January, with the financial services sector doing particularly well, but overall market performance was once more dragged down by a lethargic resources sector and failed to keep up with overseas markets. As a result, Canadian equity funds produced returns that were good on an absolute basis but lagged other equity categories.

Read: Fixed-income investors should look abroad

The Morningstar Canada Fund Indices that track the Canadian Equity, Canadian Dividend & Income Equity, and Canadian Small/Mid Cap Equity categories increased by 2.5%, 2.7%, and 2.9%, respectively. The Canadian Focused Equity and Canadian Focused Small/Mid Cap Equity categories, which can invest up to 50% in foreign stocks, did better with increases of 3.6% and 3.4%, respectively.

As was the case in December, the three fixed-income categories that target intermediate and long-term bonds were in the red in January. The Morningstar Canadian Fixed Income Fund Index decreased by 0.7% for the month, while Canadian Long Term Fixed Income and Canadian Inflation-Protected Fixed Income decreased by 2.2% and 2.6%, respectively.

Read: Canada should pursue global markets

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.