Canadians play it safe in June: IFIC

Canadians continued to park their mutual fund investments in money market funds in June, with 75% of net new sales landing in the short-term category, according to the latest figures from the Investment Funds Institute of Canada.

Among the firms that report to IFIC, sales totalled $1.6 billion, but only about $400 million ended up in long-term funds.

“The overall level of activity was reasonably good month overall, with the qualifier that three-quarters of the sales were into low-margin money market funds,” says Rudy Luukko, investment funds editor, Morningstar Canada. “Looking back over the past 10 years, $1.6 billion would have been about an average, middling kind of month.”

Total assets under management fell $19.2 billion from the end of May, to $700.1 billion at the end of June. Market movement wiped out about $20.8 billion in industry assets, dwarfing the net sales of $1.6 billion.

“Sales year-to-date were below what they were last year largely due to a rise in gross redemptions rather than a fall in gross sales,” said Pat Dunwoody, vice-president, member services and communications. “Year-to-date gross sales were $101.2 billion, or 2.2% higher than last year.”

Total net sales averaged $1.9 billion per month in the first half of the year.

“Not all of the activity was in money market funds — the Balanced category as a group attracted $1.2 billion, which was roughly the same as all of the inflows into money market categories,” Luukko points out. “The real squeeze was on Equity Categories, where investors were not willing to make any new commitments. The notable difference was in Canadian equity, which was modest, but it still had 121 million in new sales.”

Domestic Balanced funds attracted net inflows of $614 million, while the Global Balanced category received an additional $600 million in new cash. Specialty funds pulled in more than $84 million.

Related Stories

Financials, foreign equity hit hard in Q2 May: Money market sales surge

Straight-up equity funds were hit hard, however — the Domestic Equity group saw net redemptions of $452 million, up from $308 million in May. Meanwhile, Global and International Equity funds saw redemptions of $431 million in June, up from $166 million in May.

Bond funds saw redemptions of nearly $52 million.

Among the fund manufacturers, RBC maintained its lead in sales, pulling in almost $1.1 billion, with nearly $915 million going into money market funds.

Dynamic Funds posted total net sales of over $685 million but reversed the overall market trend with its money market funds seeing $25 million in redemptions. The firm’s long-term funds saw net inflows of $710 million.

“Dynamic has had very impressive sales performance, especially for this time of year. They’ve had quite a number of excellent performers, and that’s always helpful,” says Luukko. “When market conditions become more difficult, the advisor-sold channel tends to be more resilient than at the banks. “They’ve been able to capture a good portion of the buying public — within the advice channel — who are looking for above market returns.”

Rounding out the top three was Fidelity Investments, with total net sales of $454 million, including $446 million in long-term funds.

AIM Trimark was hit with nearly $1.1 billion in net redemptions, nearly all of which came from long-term funds. AGF Funds was hit by institutional selling, with net redemptions topping $336 million, while AIC continued to shed assets as well, with $97 million in net redemptions.

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

(07/15/08)