August sees blip in money market sales

The mutual fund industry posted another mediocre month in August, with net new sales totalling $744 million, according to final sales data out of IFIC. Even tacking on $528 million in reinvested distributions, total net sales hit only $1.3 billion, down from $1.8 billion a year ago.

“It was a pretty sluggish month, as August often is, but this one saw quite a sharp drop from the year earlier,” says Rudy Luukko, investment funds editor, Morningstar Canada.

“In long-term funds, the decline was even more pronounced, with sales falling to $330 million last month, from $1.2 billion in August 2005,” Luukko says. “However, the decline really isn’t as bad as it might appear at first glance, since 2005 was an unusually strong year for summer sales.”

Balanced funds continued to sell well, leading the pack with net new sales of $539 million, which rounded total assets under management for this class up to $161.1 billion, representing more than 26% of all mutual fund assets in Canada. Overall assets under management for the industry totalled $608.1 billion, up $9 billion from July.

“An interesting feature of August sales is that money market funds were $413 million, surpassing even long-term funds,” said Joanne De Laurentiis, president and CEO of IFIC.

Investors appear to be sounding a cautious note, with Canadian money market fund sales at $404 million in August, plus an additional 9.7 million in foreign money market funds. However, Luukko says this is largely due to institutional purchases at a single company.

“This was mostly due to very strong money market fund sales at RBC,” he explains. “The top-selling fund in the country last month, among all categories, was RBC Premium Money Market, which has a low MER and a high minimum investment of $100,000. It had $449 million in net sales.”

RBC additionally sold $203-million-worth of its RBC Canadian Money Market fund.

Third- and fourth-place sales rankings also went to relatively cautious categories: bond income saw net inflows of $197.5 million, and dividend income funds attracted about $158 million.

“What we can say about consumer attitudes in general is that they prefer the conservative income-oriented categories and that was true again last month,” Luukko concludes. “Also consistent with the prevailing trend of 2006 was the shunning of funds in the Canadian equity category.”

The highest net redemptions were found among Canadian common-equity funds, which saw net outflows of nearly $354 million. U.S. common-equity funds were hit by outflows of $144 million, while foreign-stock funds saw $82 million in net redemptions.

On a year-to-date basis, balanced funds remain in the sales lead, attracting nearly $8.4 billion in new money, followed by dividend income funds, with $7.9 billion, and bond income funds with nearly $5.2 billion.

The first eight months of 2006 saw net outflows totalling $1.4 billion from Canadian common-share funds. Only money market funds have seen greater outflows, amounting to $2.7 billion.

The top-selling fund company was RBC Asset Management, thanks to its strong money market fund sales, which catapulted net new sales to a whopping $739 million. Second place went to CI, which had net inflows of $100 million, followed by Acuity, with $78 million. Rounding out the top five were TD and BMO, with net new sales of $57 million and $44 million, respectively.

“In the past, we’ve often thought of the banks as having more seasonality in their fund sales,” says Luukko. “In the case of the most recent month, the highest seasonality of sales seems to be among the independent firms. In a month that’s generally among the slowest of the year, they were the slowest of the slow.

Four of the five firms that had the highest redemptions were independents who sell primarily through financial advisors.”

AIM Trimark posted the highest net outflows, amounting to $272 million, followed by CIBC at $135 million. McKenzie was hit with a $110 million net sell-off, with AIC and Franklin Templeton posting redemptions of $92 million and $85 million, respectively.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(09/15/06)

Steven Lamb