Big banks boost 2004 fund sales

(January 17, 2005) Canada’s mutual fund industry had a banner year in 2004, with total net sales of $14.7 billion, IFIC says in its monthly sales report. Three bank-owned firms led the way, accounting for nearly half of net sales last year.

“These are the best sales figures we’ve had had since 2001,” said IFIC president Tom Hockin. “They support the enduring confidence Canadian investors have in mutual funds as we enter the RRSP season and bode well for the ongoing growth of the industry in general.”

Rudy Luukko, investment funds editor at Morningstar Canada, agrees it was a pretty decent year for the fund industry, considering lingering “fear factors,” such as concerns over fees and expenses and market timing settlements. “The sales look especially robust compared to the previous year, when the industry finished in net redemptions,” he notes.

In December, gross sales of all funds were $11.6 billion, while net sales stood at $1.2 billion. Industry assets rose 13% year-over-year to $497 billion.

Long-term funds accounted for the bulk of December’s sales, at $822 million, while money-market funds contributed a further $366 million.

Once again, Canadians showed a preference for dividend, bond and income funds, with those categories attracting $1.4 billion in net sales.

In terms of fund company sales, it was a clean sweep for three bank firms in 2004, says Luukko, led by TD Asset Management ($2.8 billion), RBC Asset Management ($2.3 billion), and BMO Investments ($2 billion).

“The three leading firms of the past year were well-positioned to capitalize on this trend towards investing for income,” Luukko says, noting that TD’s Monthly Income Fund saw its assets grow 191% year-over-year, while similar funds offered by RBC and BMO doubled in terms of assets.

Among the advisor-sold firms, Brandes Investment Partners led the way with $1.8 billion in sales, thanks mainly to its global equity fund, which doubled in size. “This was an exception to the rule, since global equity funds were not in favour,” says Luukko. “It wasn’t all bank-fund firms doing well and advisor-sold firms doing poorly.”

Still, several major advisor-sold firms did fare poorly in 2004, including AGF Management, with $2.3 billion in redemptions, AIC, down $2.1 billion, and Fidelity Investment, off $1.4 billion.

Looking ahead, Luukko expects fund sales to continue to improve in January and February compared to last year, as investors seek alternatives to low-yielding bank deposit instruments, such as GICs. “GIC returns are among the poorest they have been in the past 15 years,” he notes. “The GIC-refugee phenomenon has not gone away.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com