Negative start to 2016 for most equity funds: Morningstar

Only seven of the 42 Morningstar Canada Fund Indices—including one equity fund index—increased during January, while 18 indices decreased by 2% or more.

Here are some additional highlights from Morningstar’s January 2016 preliminary report.

• The month’s top-performing fund index, and the only one representing an equity fund category to post an increase in January, was the one that tracks the Precious Metals Equity category, which increased 5.4%. The other 20 equity fund categories were all in the red.

• The best-performing domestic equity fund category was Canadian Dividend & Income Equity with a 0.8% decrease. The fund index that tracks the more broadly based Canadian Equity category was down 1.4%, reflecting the 1.2% decline of the S&P/TSX Composite Index for the month. The worst-performing domestic equity fund indices were Canadian Focused Small/Mid Cap Equity and Canadian Small/Mid Cap Equity, which decreased 4.1% and 4.4%, respectively.

• The Morningstar U.S. Equity Fund Index decreased 4.5%, ranking fifth from the bottom of the 42 Fund Indices. Currency effects once again helped Canadian investors who hold unhedged U.S.-dollar investments, as the Canadian dollar depreciated by 1.7% against the greenback. This mitigated the 5.0% drop in the S&P 500 Index, when measured in U.S. dollars. The Morningstar U.S. Small/Mid Cap Equity Fund Index was also one of the worst performers in January, with a 4.4% decrease.

• Exposure to China hugely detracted from performance among foreign equity funds, as the Shanghai Composite Index andHong Kong’s Hang Seng Index decreased by 22.6% and 10.2%, respectively, in local currencies. The worst-performing equity fund indices were the ones that track the Greater China Equity and Asia Pacific ex-Japan Equity categories, down 10.3% and 6.7%, respectively. Other poor performers include the Morningstar International Equity Fund Index, with a 4.6% decrease, and Asia Pacific Equity and Emerging Markets Equity, which were both down 3.9%.

• Three of the seven fixed-income fund categories tracked by Morningstar posted modest gains last month. The Morningstar Canadian Long Term Fixed Income Fund Index was up 0.5%, while the Global Fixed Income and Canadian Fixed Income fund indices increased by 0.2% and 0.1%, respectively. The worst fixed-income performer—and worst category overall—was Preferred Share Fixed Income, which decreased 10.7%.

Staff

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