Equity Fund Rally Continues in February, Morningstar Canada Data Show

TORONTO, March 3, 2015 /CNW/ - After posting healthy gains in January, equity mutual funds in Canada had another solid month in February, as global markets benefited from a rebound in the price of oil, positive economic data from the United States, and accommodative policies from central banks. Forty of the 42 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories, increased for the month of February, according to preliminary data today released by Morningstar Canada.

"After a six-month slide, oil prices recovered somewhat in late January, which continued during the first week of February, despite the news of record U.S. inventories. The rest of the month saw heightened oil price volatility without significant gains, leading economists and market participants to question whether we've finally reached the bottom," Morningstar Manager Research Analyst Achilleas Taxildaris said.

Small-capitalization funds, which typically have a higher exposure to the oil and gas sector, were among the best performers last month. The Morningstar indices that track fund returns in the U.S. Small/Mid Cap Equity, Canadian Small/Mid Cap Equity, and Canadian Focused Small/Mid Cap Equity categories increased by 5.8%, 5.4%, and 5.0%, respectively in February.

Along with the energy sector, financial services stocks had a stellar performance last month, and as a result the other domestic equity fund indices also ranked in the top 10: the Canadian Equity, Canadian Focused Equity, and Canadian Dividend & Income Equity fund indices increased by 4.0%, 3.8%, and 3.7%, respectively. Funds that specifically target the financial services sector were the best overall performers with an average gain of 7.7%.

U.S. Equity funds, which have beat every other category over the past two years, continued to surge ahead last month, with the category's fund index increasing by 4.4%. When measured in U.S. dollars, the S&P 500 Index was up 5.7% in February, but currency effects diminished those funds' returns for Canadian investors.

"Strong job reports for a third consecutive month showed a strengthening U.S. economy, but the Federal Reserve is not in a rush to start tightening its monetary policy, which helped the stock market reach new all-time highs. While the Fed had to admit that the employment front looks healthier, muted inflation data provides some support to its dovish stance," Taxildaris said.

Along with oil prices, the Canadian dollar rallied last month to finish in positive territory versus most world currencies after record losses in January. While this had negative effects for Canadian investors holding foreign equity mutual funds, it wasn't enough to eliminate the strong gains stock markets experienced around the world. The Morningstar Global Equity Fund Index was up 3.4% for the month, while the indices of the International Equity and European Equity categories increased by 4.4% and 4.5%, respectively.

"In Europe, Greece dominated news headlines once again, as the debt-laden country's newly elected radical left government set out to negotiate new terms of the bailout program with its European Union partners. After three weeks of discussions, they reached a deal for a four-month extension of the existing program. Meanwhile, the euro posted gains and European equity markets continued to perform well, as market participants saw a very small probability of a complete fallout in talks and the eventual exit of Greece from the eurozone," Taxildaris said.

For more about February 2015 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 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 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 14 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 and had approximately US$170 billion in assets under advisement or management as of Dec. 31, 2014. The company has operations in 27 countries.

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SOURCE Morningstar Research Inc.