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Press release from CNW Group

Last-Minute Rally Rescues Funds in November, Morningstar Canada Data Show

Friday, December 02, 2011

Last-Minute Rally Rescues Funds in November, Morningstar Canada Data Show07:00 EST Friday, December 02, 2011TORONTO, Dec. 2, 2011 /CNW/ - Investment funds in Canada were heading for yet another disastrous month until the final days of November, when key economic announcements triggered a wave of renewed optimism. Only seven of the 22 Morningstar Canada Fund Indices that track equity categories had positive returns for the month, but most of those that were in the red lost less than 1% at month-end, according to preliminary performance data released today by Morningstar Canada."Investors who didn't pay attention in the last three days of November would be shocked to see how much can change over such a short time," said Morningstar Fund Analyst Salman Ahmed. "The S&P/TSX Composite shot up 6.5% while the S&P500 was up 4.5% (in Canadian dollar terms). The S&P 500 returns would have been higher for Canadian investors were it not for the loonie's rise versus the U.S. dollar during that time. This is in stark contrast to how the market performed during the first 27 days of the month, when equity markets were down across the board."As of Nov. 27, the Morningstar Canadian Equity Fund Index was looking at a 6.3% loss for the month to date, but following the month-end rally the funds in that category ended the month with just a 0.5% loss. Similarly, the fund index that tracks the U.S. Equity category closed the books on November with a 1.1% gain even though just three days earlier its month-to-date return was a 4.2% loss."The rally was largely attributable to easing concerns over Europe. Reports of a rescue plan for Italy, which were quickly dismissed by the International Monetary Fund as false, triggered a show of confidence that governing bodies would be able to coordinate a plan of action. The market was rewarded with the announcement that central banks worldwide would work on a coordinated effort to provide liquidity," Ahmed said.Excluding sector-specific categories, the only other equity-based Morningstar Canada Fund Indices to post gains in November were U.S. Small/Mid Cap Equity with 1.5%, North American Equity with 0.4% and Japanese Equity with 0.2%. There was an unusually eclectic mix of fund categories at the top of the performance table that also featured the Health Care Equity, 2025+ Target Date Portfolio, and Real Estate Equity fund indices, with gains of 1.5%, 1.4%, and 1.3%, respectively. The top performer for the month was the Morningstar Canadian Long Term Fixed Income Fund Index with a 2.3% return.One of the worst performers in November was the fund index that measures the Financial Services Equity category, which lost 3.6%. "Investors continue to be skeptical regarding banks. Their sharp rally over the last few days dampened what was otherwise dismal performance. Adding to investors' woes was a downgrade of numerous corporate credit ratings by rating agency Standard & Poor's. Bank of America, Goldman Sachs, Citigroup, and JPMorgan in the United States, along with UBS, Barclays, and HSBC were all downgraded," Ahmed said.For more on November fund performance, go to 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 MorningstarMorningstar 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 individuals, financial advisors, and institutions. Morningstar provides data on approximately 330,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 5 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services and has more than $167 billion in assets under advisement and management as of Sept. 30, 2011. The company has operations in 26 countries.For further information: Salman Ahmed, Fund Analyst, Morningstar Canada, (416) 484-7823; Christian Charest, Editor, Morningstar Canada, (416) 484-7817