Sinking dollar improves foreign equity fund performanceBy Andrew Rickard | January 06 2016 01:39PM
The loonie's decline has helped to boost the returns of foreign equity funds.
According to Morningstar's preliminary year-end performance report for 2015, the decrease in the value of the Canadian dollar against virtually all other currencies played a significant role in improving returns in the foreign equity category.
This year's top-performing Morningstar index was the one that tracks the European Equity category, which was up by 19.0%, while the other high performing fund indices were also in foreign equity categories: Global Small/Mid Cap Equity, International Equity, Asia Pacific Equity, and Global Equity, gained 18.8%, 13.8%, 12.4%, and 11.9% respectively.
Unable to benefit from this favourable currency effect, domestic equity funds were among the worst performers last year. All five of Morningstar's Canadian equity fund indices posted declines; the Canadian Focused Equity was the best of the bunch and only down 0.7%, while the Canadian Equity fund index was lost 6.2%.
"The energy and basic materials sectors were the main detractors from performance for Canadian equity funds over the past year, as both sectors declined more than 20%," notes Morningstar.