March 2, 2018

Equity Funds Drop in February 2018; Currency Effects Benefit Foreign Equity Funds, Morningstar Canada Data Show

TORONTO, March 2, 2018 /PRNewswire/ -- Morningstar Research Inc., a Canadian subsidiary of Chicago-based independent investment research provider Morningstar, Inc. (NASDAQ: MORN), today released preliminary February 2018 performance data for its 44 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories. Only seven of the 44 fund indices increased during the month, all of them by 0.7% or less, while 12 of the 37 losing indices decreased by 2.0% or more.

Highlights from Morningstar's February 2018 preliminary performance report include:

  • The top performers among the 44 Morningstar Canada Fund Indices all tracked fixed-income categories. Best-performing overall was the Morningstar Floating Rate Loans Fund index, which increased 0.7% in February, while the fund indices that measure the aggregate returns of funds in four other fixed-income categories posted increases between 0.1% and 0.3%. Three fixed-income fund indices ended the month in negative territory, the worst of which was the Morningstar Preferred Share Fixed Income Fund Index, which decreased 1.0%.
  • Every major stock market in the world was down in February, with losses typically ranging from 3% to 6%. Consequently, all of the 22 fund indices that track equity categories were also in the red. However, because the Canadian dollar depreciated against most foreign currencies, the losses for many foreign fund categories were limited to 1% or less, while domestic-equity funds generally ended up at the bottom of the performance rankings with more severe losses.
  • Among equity fund categories, the best-performing fund index was Asia Pacific Equity, which decreased by 0.01%, followed by Global Small/Mid Cap Equity, down 0.04%, and U.S. Small/Mid Cap Equity, down 0.2%.
  • In the United States, the S&P 500 Index had a total return of -3.7% in February, but for Canadian investors the losses were mostly offset by the U.S. dollar's 4.2% appreciation against its Canadian counterpart, leading to a decrease of 0.6% for the fund index that tracks the U.S. Equity category. The Global Equity fund index, whose constituent funds on average hold more than half their assets in U.S. stocks, followed closely with a 0.7% decrease, while the European Equity fund index was down 1.8% for the month.
  • The worst-performing fund indices were the ones that track the Energy Equity, Precious Metals Equity, and Natural Resources Equity fund categories, decreasing 7.0%, 5.7%, and 5.3%, respectively.
  • As has been the case for the past several months, the energy sector continued to impede the Canadian market, which was reflected in the performance of domestic-equity funds. The Morningstar Canadian Equity Fund Index had a 2.8% decrease, while the other four domestic-equity fund indices posted results ranging from -2.2% for Canadian Focused Equity to -2.9% for Canadian Dividend & Income Equity. Despite the negative performance, domestic-equity funds still managed to surpass the benchmark S&P/TSX Composite Index's total return of -3.0%, owing in part to an underweight to energy stocks. The average fund in the Canadian Equity category allocated only 16.9% of its assets to the energy sector, compared to 18.7% for the benchmark.

To view the complete report about Morningstar's preliminary February 2018 performance data for Canadian funds, please visit https://goo.gl/s2EDh6.

Morningstar Canada's preliminary fund performance figures are based on change in funds' net asset values per share during the month, and do not necessarily include end-of-month income distributions. Final performance figures will be published on www.morningstar.ca next week.

About Morningstar Research Inc. and Morningstar, Inc. 
Morningstar Research Inc. is a Canadian subsidiary of Chicago-based Morningstar, Inc., a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than US$195 billion in assets under advisement and management as of Dec. 31, 2017. The company has operations in 27 countries. 

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