Rising Commodity Prices Boost Small-Cap Funds in November, Morningstar Canada Data Show
December 02 2010 - 7:00AM
PR Newswire (Canada)
TORONTO, Dec. 2 /CNW/ -- TORONTO, Dec. 2 /CNW/ - Investment funds
in Canada that focus on domestic or U.S. small-cap equities offered
a solid performance in November, as rising commodity prices boosted
companies in that space. However, that same factor sparked
inflationary fears among bond investors, leading to losses for
funds in the fixed-income categories. Meanwhile, concerns about the
bailout of banks in Ireland coupled with the decline of major
European currencies led to some steep losses for European equity
funds. The best performers among the 44 Morningstar Canada Fund
Indices in November were those that track the Precious Metals
Equity and Natural Resources Equity categories, which posted gains
of 8.5% and 7.5%, respectively, according to preliminary
performance data released today by Morningstar Canada. Next came
three indices that measure the performance of North American
small-cap funds, many of which have significant exposure to
resources: Canadian Focused Small/Mid Cap Equity (4.6%), Canadian
Small/Mid Cap Equity (4.2%), and U.S. Small/Mid Cap Equity (3.4%).
"Concerns about the U.S. government's asset purchases and Europe's
downbeat economic situation pushed up the price of gold, which is
viewed as an alternative to paper currencies," said Esko Mickels,
fund analyst for Morningstar Canada. "Silver followed suit, aided
by upgraded price forecasts, and its historic relationship to gold.
Foreign investors continued to show interest in Canadian resource
companies such as Potash One, which benefited from friendly
takeover advances from Germany's K+S AG." All six fund indices that
track fixed-income categories were in the red last month. Leading
the decline among domestic categories were longer-dated bonds,
which were impacted by the acceleration in inflation. "The latest
figures for the Consumer Price Index announced on Nov. 23 showed an
increase from 1.9% in September to 2.4% in October, driven by
higher gasoline prices," Mickels said. The Morningstar Canadian
Long Term Fixed Income Fund Index lost 1.5% for the month. The
worst performer last month was the Morningstar European Equity Fund
Index with a loss of 8%. Stock markets in Europe were mostly
negative, but the biggest blow for Canadian investors resulted from
currency movements, as the euro and British pound lost 5.5% and 2%,
respectively, against the Canadian dollar. "Continued concerns with
the finances of Greece, Portugal, Spain, Italy and Ireland, along
with increasing worry over France, have some economists wondering
whether the eurozone will continue to survive in its current form.
Stronger countries such as Germany have a limited willingness to
assist weaker countries, which are suffering from lacklustre
competitiveness but are unable to devalue their currencies as long
as they remain in the union. These concerns sent the euro down
sharply against world currencies," Mickels said. Europe's woes also
had an impact on the broadly diversified International Equity
category, whose fund index lost 3.9% for the month. The loss in
that category was tempered by the strong showing of Japan, another
major component; Japanese equities, as measured by the Nikkei 225
Index, rose 8% in local currency terms. Meanwhile, Global Equity
funds were further buoyed by U.S. equities, which were flat for the
month, leading to a 1.4% loss for the Morningstar Global Equity
Fund Index. For more on November fund performance, go to
www.morningstar.ca. 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
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 Internet, software, and print-based
products and services for individuals, financial advisors, and
institutions. Morningstar provides data on approximately 370,000
investment offerings, including stocks, mutual funds, and similar
vehicles, along with real-time global market data on more than 4
million equities, indexes, futures, options, commodities, and
precious metals, in addition to foreign exchange and Treasury
markets. The company has operations in 26 countries. pEsko Mickels,
Fund Analyst, Morningstar Canada, (416) 484-7815; Christian
Charest, Editor, Morningstar Canada, (416) 484-7817/p
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