The report showed the preliminary 2017 year-end performance data for the 44 Morningstar Canada Fund Indices.

Asian equity funds performed best in the Canadian fund indices market last year, according to Morningstar Canada's 2017 performance report.

The report showed the preliminary 2017 year-end performance data for the 44 Morningstar Canada fund indices, which measure the aggregate returns of funds in various standard categories.

The best performer among the 44 Morningstar Canada Fund Indices tracks the Greater China Equity category, with a 35.9 per cent increase, mirroring the 36.0 per cent increase of Hong Kong's Hang Seng Index. 

Other market indexes in the Asia-Pacific region also performed well last year, including South Korea's KOSPI, Japan's Nikkei 225, and the Taiwan Stock Exchange Weighted Index, which increased 21.8 per cent, 19.1 per cent, and 15.0 per cent, respectively. As a result, the fund indices that track the Asia Pacific Equity and Asia Pacific ex-Japan Equity categories finished 2017 among the top performers with increases of 24.9 per cent and 25.7 per cent, respectively. 

Also, the strength of Asian stocks helped funds in the Emerging Markets Equity category, which collectively increased 24.3 per cent.

According to Morningstar, European equity funds benefited from a combination of strong market performance and favourable currency movements, and the Morningstar European Equity Fund Index recorded a 14.6 per cent increase for the year. Germany's DAX Index increased 12.5 per cent in 2017 when measured in local currency, while France's CAC 40 and the UK's FTSE 100 were up 9.3 per cent and 7.6 per cent, respectively.

Meanwhile, the euro and UK pound sterling rose 6.2 per cent and 2.4 per cent against the Canadian dollar, respectively,

In the United States, the S&P 500 Index posted a total return of 21.8 per cent—its ninth consecutive calendar year in positive territory and best performance since 2013. 

However, Canadian fund investors only captured a fraction of this gain as the Morningstar US Equity Fund Index increased 13.2 per cent for the year, hampered by the Canadian dollars seven per cent appreciation against the US dollar.

Domestic equity funds had positive results for the year but trailed their foreign counterparts. The Morningstar Canadian Equity Fund Index increased 7.7 per cent, underperforming the benchmark S&P/TSX Composite Index which had a total return of 9.1 per cent, while the fund indices that track the Canadian Dividend & Income Equity and Canadian Small/Mid Cap Equity categories were up 7.9 per cent and 3.2 per cent, respectively.

Despite the interest rate hikes enacted by central banks in many countries including Canada and the United States, seven of the eight fund indices that track fixed-income categories increased in 2017. 

By far the best-performing fund index in this area was Preferred Share Fixed Income with a 14.1 per cent increase. Second-best was Canadian Long Term Fixed Income, one of the categories most sensitive to interest rates, which finished the year with a 6.3 per cent increase. Morningstar said that the market may have been expecting more meaningful rate hikes from the Bank of Canada.

The only fixed income category in the red was Canadian Inflation-Protected Fixed Income, down 0.03 per cent.