A year’s worth of sales in six months

Long-term net fund sales dropped from $2.56 billion in May to around $1.9 billion last month, according to the latest data from the Investment Funds Institute of Canada. This can likely be attributed to the traditional summer slowdown rather than any weakness in the industry. In fact, last month marked the best June sales number in almost a decade.

“Net sales were the highest sales for the month of June since 1997,” says Pat Dunwoody, IFIC’s vice-president of member services and communications. “Sales for the first six months of 2007 were $25.4 billion, which surpasses annual sales for all of 2006.”

Many of the same trends that have driven sales in 2007 carried over into June, such as the strong investor demand for global equity and balanced funds. The domestic balanced and global balanced asset classes posted the highest sales, at $1.1 billion and $815 million respectively, based on IFIC’s classification system.

“The top three selling (CIFSC) categories were all balanced, led by global balanced, at $579 million, followed by Canadian balanced and Canadian income balanced, each of which also passed the $500 million mark in sales last month,” says Rudy Luukko, investment funds editor at Morningstar Canada. “The top-selling equity category was global equity, with $329 million in sales.”

Like May, June also saw a massive sell-off in Canadian investments, Luukko says.

“The worst-selling equity category was Canadian equity. It was at redemptions of more than $468 million,” Luukko says. “The Canadian market has performed very strongly in recent years. Fund investors and their advisors are either choosing to go with more diversified approaches or they are quite possibly redeploying some of those gains from Canadian investments into foreign funds.”

June saw the reversal of one trend, however, as total industry assets under management (AUM) declined. The total mutual fund asset base was just under $707 billion, a decline of 0.8% from May. IFIC reports that on a year-to-date and year-over year basis, AUM growth is still robust at 6.9% and 19.9% respectively.

Luukko says these declines are to be expected occasionally, since markets will have their ups and downs.

“Asian and emerging markets did well last month, and precious metals and science technology also finished in positive territory. Most long-term asset categories had losses,” he says. “For instance, the Morningstar U.S. equity was down 2.2% last month, and our Canadian equity mutual fund index was down 1.3%, and the global equity mutual index was also down.”

As the IFIC numbers attest, the market downturn had little effect on fund sales. The industry’s consistent sales leaders, RBC Asset Management and TD Asset Management, raked in $364 million and $255 million respectively.

“RBC continues to have strong sales momentum, routinely leading the industry in sales every month. Its money market sales were negative, so all of that growth came in long-term funds as well,” Luukko says. “It’s noteworthy that RBC and TD are also the bank-sponsored firms that have been the most active in marketing their funds through the commissioned fund channels and fee-based channels as well.”

AGF, however, was the real darling of the independent advisory channel, Luukko says, finishing the month with the fourth largest sales tally, at $129 million. Much of that success is on the backs of two funds managed by its star portfolio team in Dublin Ireland, AGF International Advisors. The AGF International Stock Class and the AGF European Equity Class posted sales of $61 million and $33 million respectively.

“The deep-value-style team in Dublin accounted for $94 million in sales, well over half of their total net sales,” he says. “Clearly they’ve been the main driver of sales for AGF.”

On the opposite end of the spectrum is AIC Limited. They suffered another $92 million in redemptions. Its one bright spot was the AIC Global Focus fund, which posted a decent $12 million in sales.

Luukko notes that one new development on the horizon for next is month is that Morningstar Canada will be adopting the revised set of CIFSC categories as part of a reinstatement of a single standard of fund categories in Canada.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(07/16/07)

Mark Noble