Morningstar’s Canada fund indices increased in Q3

Read: Tables have turned for high yield

Morningstar Research has released preliminary September and third-quarter 2016 performance data for its 44 Morningstar Canada Fund Indices. This data measures the aggregate returns of funds in various standard categories.

Overall, says Morningstar, 43 of the 44 fund indices increased during the quarter ending Sept. 30, 2016, including 14 indices that increased by at least 5%. However, the increases were less than 1% in most cases.

Data highlights

• The fund index that tracks the Greater China Equity category performed the best with a 14.6% increase in the third quarter. Funds in that category were up 2.6% in September, following increases of 6.7% and 4.7% in August and July, respectively. Read: Where to find investment prospects in China
• As a result of the strong performance of Chinese equities, funds in the Emerging Markets Equity, Asia Pacific Equity, and Asia Pacific ex-Japan Equity categories also performed well, with their respective fund indices increasing 9.1%, 8.8%, and 7.8% for the quarter.
• In Canada, the S&P/TSX Composite Index had three consecutive months in positive territory, ending the third quarter with an increase of 5.5%. The energy and financial services sectors were the biggest contributors to Canadian stock market performance, while the basic materials sector was a detractor. Read: Find yield in volatile sectors
• Funds in the Canadian Equity category followed the pace of the benchmark, with the Morningstar Canadian Equity Fund Index increasing 5.3% for the quarter. Meanwhile, the fund indices that track the Canadian Small/Mid Cap Equity, Canadian Dividend & Income Equity, and Canadian Focused Equity categories were up 5.1%, 4.8%, and 4.6%, respectively, while the Canadian Focused Small/Mid Cap Equity Fund Index was the best performer among domestic equity fund indices with a 5.5% increase.
• Funds in the U.S. Equity category collectively posted a 4.7% increase in the third quarter, reflecting the 3.9% increase of the S&P 500 Index as well as a 0.8% appreciation of the U.S. dollar versus its Canadian counterpart. The U.S. Small/Mid Cap Equity Fund Index lagged its larger-cap peer with a 4.2% increase. Both these fund indices had strong gains in July but were flat in August and slightly negative in September.
• The worst-performing fund index for both the month and the quarter was the one that tracks the Real Estate Equity category, which decreased 0.7% in September and 1.3% in the third quarter.
• European markets were weak but positive in August and September. And, owing to their strong gains in July, European Equity funds were among the best performers in the third quarter, collectively increasing 5.7%. Among other sector-diversified foreign-equity fund categories, the Morningstar International Equity Fund Index increased 6.4%, while the Global Equity and Global Small/Mid Cap Equity fund indices increased 5.5% and 4.9%, respectively, for the quarter. Read: What to expect as Brexit talks heat up
• Fixed-income funds saw little movement in September, with most fund indices increasing between 0.1% and 0.3%. The best performer for the month was the Morningstar Floating Rate Loans Fund Index with a 0.8% increase, while the Preferred Share Fixed Income Fund Index was the worst performer with a 0.3% decline. For the quarter, all fixed-income categories were positive, with increases ranging from 0.4% for the Canadian Short Term Fixed Income Fund Index to 4.6% for Preferred Share Fixed Income.

Click here to view the complete report on Morningstar’s preliminary September and third-quarter 2016 performance data for Canadian funds.

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