Declining Loonie Pushes Foreign Equity Funds Up in May, Morningstar Canada Data Show

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Jun 02, 2016, 07:00 ET

TORONTO, June 2, 2016 /PRNewswire/ -- Morningstar Research Inc., a Canadian subsidiary of Chicago-based independent investment research provider Morningstar, Inc. (NASDAQ: MORN), today released preliminary May 2016 performance data for its 42 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories. All but two of the 42 Fund Indices increased during the month, with the 10 top-performing indices all representing non-Canadian equity fund categories.

Highlights from Morningstar's May 2016 preliminary performance report include:

The Canadian dollar depreciated against most major world currencies during the month. Notably, the loonie dropped 4.2% against the U.S. dollar, 3.6% against the British pound, and 1.6% against the euro. The loonie also lost ground against Asian currencies including the Chinese renminbi, the Hong Kong dollar, and the Japanese yen. The depreciation of the Canadian dollar significantly buoyed the performance of Canadian mutual funds that focus on foreign equities, many of which also benefited from modest market gains.
The best-performing fund index for May was the one that tracks the U.S. Equity category, which experienced an increase of 5.1%. In addition to positive currency effects, the 1.8% increase in the S&P 500 Index contributed to the positive performance of funds in this category in May. The U.S. Small/Mid Cap Equity fund index was the third-best performer with a 4.8% increase in May.
The second-best-performing fund index was Asia Pacific Equity, with a 5.0% increase. The biggest market contributor to the performance of Asian equity funds in May was Japan, where the Nikkei 225 Index increased by 3.4%. Stock markets in Hong Kong, Shanghai, and Seoul were all slightly negative, but currency gains more than compensated market losses; notably, the Hong Kong dollar appreciated 4.2% against the Canadian dollar.
Other fund indices that did well in May include European Equity, Global Equity, Greater China Equity, and International Equity, up 4.3%, 4.3%, 3.8%, and 3.7%, respectively.
Domestic equity fund indices were all in positive territory for the month, though they significantly trailed their foreign counterparts. The Canadian Focused Small/Mid Cap Equity and Canadian Focused Equity fund indices—in which funds can invest up to half of their assets in non-Canadian stocks—were the best performers in that group, increasing 2.6% and 2.5%, respectively. The purely domestic Canadian Equity fund index increased 1.4%, while the Canadian Small/Mid Cap Equity fund index increased 1.8%. Both indices surpassed the benchmark S&P/TSX Composite Index, which posted a 1.0% increase in May.
The only fund indices to post negative results in May were the ones that track the Natural Resources Equity and Precious Metals Equity categories, decreasing 0.5% and 6.0%, respectively. These were the best-performing fund categories by a wide margin for the first four months of the year, and despite the setback in May remain the best performers for the year to date.

To view the complete report about Morningstar's preliminary May 2016 performance data for Canadian funds, please visit https://goo.gl/cJKd1E.

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 on approximately 525,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on nearly 18 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 investment advisory subsidiaries, with more than US$180 billion in assets under advisement or management as of March 31, 2016. The company has operations in 27 countries.

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SOURCE Morningstar Research Inc.