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TheStreet Open House

All Equity Sectors Hit Hard In May, Morningstar Data Show

TORONTO, June 4, 2012 /CNW/ - All equity fund categories in Canada ended May with losses, according to preliminary performance numbers today released by Morningstar Canada. All 22 Morningstar Canada Fund Indices that track the aggregate performance of equity fund categories were in the red, and only eight of the total 42 indices constructed by Morningstar posted flat or positive results for the month.

With most balanced funds also in negative territory, the best outcomes showed up in fixed-income categories. "Investors continue to ignore the prospect of rising rates and flock to the safety they perceive in fixed income," Morningstar Fund Analyst Nick Dedes said. "That popularity is driving yields lower and prices higher."

The Morningstar Canadian Long Term Fixed Income and Morningstar Canadian Inflation-Protected Fund Indices led the way with increases of 4.1% and 3.9%, respectively, while the Canadian Fixed Income Index ranked third with a return of 1.7%. Also in the black were Global Fixed Income funds, which rose 0.8%, while the Canadian Short Term Fixed Income Index rounded out the top-five list with a return of 0.5%.

Slight losses of 0.2% and 0.5% by the Real Estate Equity and Health Care Equity Indices, respectively, were enough to make those two the best performers among equity fund categories.

Turbulence was pervasive across equity markets and the high volatility of certain other industry sectors was evident. Natural Resources Equity funds fell 10.2% for the steepest and only double-digit loss among all 42 Morningstar fund indices. That decline reflected a plunge of 14% in the price of Brent crude oil as concerns heightened about weakening economic growth and the slowing demand for fuel.

The Morningstar Precious Metals Equity Index performed only slightly better, declining 8.6% as the second-worst performer in the month. The spot price of gold dropped a steep 6% in May.

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