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All Equity Fund Categories Positive in October as Markets Shrug off U.S. Concerns, Morningstar Canada Data Show


TORONTO — Mutual funds in Canada that invest in equities posted strong results in October, as stock markets around the world showed surprising resilience to negative headlines and risks involving the political debacle in the United States. All 22 of the Morningstar Canada Fund Indices that track equity categories posted increases for the month, including 15 categories that were up by more than 4%, according to preliminary performance numbers released today by Morningstar Research Inc. (Morningstar Canada), a subsidiary of independent investment research provider Morningstar, Inc.

“The reaction of world markets to the events in the United States was muted, as investors didn’t appear to expect a prolonged government shutdown and discarded the possibility of the U.S. defaulting on its debt. For the first half of the month, even while the U.S. government was shut down, most equity fund categories had positive returns,” Morningstar fund analyst Achilleas Taxildaris said.

“Another implication from the shutdown was the delay of economic data releases, making it harder to assess the condition of the U.S. economy. This, combined with the appointment of new Federal Reserve Chairman Janet Yellen, who is considered a supporter of the accommodative monetary policy, pushed the possibility of tapering to early 2014. That action helped both the equity and bond markets to downplay the risk of a U.S. default, despite the lack of signs of an agreement about raising the debt ceiling at the time,” Taxildaris said.

When an agreement was eventually reached, it was followed by new record highs for major indexes in the United States and further increases in markets around the world. “While economists were not impressed when economic data were finally released, markets chose to focus instead on the positive earnings results of major U.S. firms such as GE and Google, leading indices even higher by month-end,” Taxildaris said. The SandP 500 Index (in U.S. dollars) ended the month with a 4.6% increase, which was bested by the Morningstar U.S. Equity Fund Index’s 5% rise as Canadian mutual funds in that category were helped by favourable currency effects.

Despite the impressive results by U.S. equity funds, four other categories did better in October. The best-performing fund indices were Emerging Markets Equity and Financial Services Equity with increases of 5.6% each, followed by European Equity and Asia Pacific ex-Japan Equity with 5.2% each. Meanwhile, funds in the Global Equity category collectively rose 4.6% while International Equity funds were up 4.2%.

Domestic equity funds also had a very strong month, with the Canadian Equity and Canadian Dividend and Income Equity fund indices both posting increases of 4.6%, and the Canadian Small/Mid Cap Equity fund index increasing by 4.4%. The Morningstar Canada Fund Indices that track the Canadian Focused Equity and Canadian Focused Small/Mid Cap Equity increased by 4.1% and 3.6%, respectively.

For the seventh time in the past 12 months, the worst-performing equity fund index in October was Precious Metals Equity, though this month it managed to eke out a positive 0.2%. Funds in that category have collectively lost more than 47% during the past year.

“News that China’s growth is stabilizing, and the decision of central banks around the world to hold any rate hikes and maintain accommodative policy, helped the precious metals equity and natural resources equity funds achieve positive returns after a weak start to the month,” Taxildaris said.

For more about October 2013 fund performance, go to

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 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, and asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 437,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 10 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately US$176 billion in assets under advisement or management as of Sept. 30, 2013. The company has operations in 27 countries.


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