Fab February for funds

(March 2, 2004) After a weak RRSP season last year, Canada’s mutual fund industry has returned to its traditionally strong February showing. Net sales are expected to be around $5 billion, IFIC says in its monthly preliminary estimate, more than 10 times higher than February 2003.

Combined with January’s $1.8 billion, total sales for this year’s RRSP season could reach $7 billion, considering that sales on the last day of the season, March 1, won’t be calculated until April.

“Net sales for the month of February are expected to be approximately $5 billion, the highest monthly sales since February 2000,” says IFIC president Tom Hockin, adding that the majority of February’s sales came from long-term funds. “This indicates that investors are not just trying to benefit from tax savings during this RRSP season, but that they are investing for the long-term,” he said.

Industry assets rose for the fifth straight month to $466 billion.

RBC Asset Management, February’s top performer, reports sales of long-term funds reached $968 million in February, a six-year high. “Well-established funds offering long-term stability and sound performance proved to be the preferred choice of investors during this RRSP season,” says RBC Asset Management president Brenda Vince.

BMO Mutual Funds says the just-completed RRSP season offered plenty of good news, “despite the fact that too many Canadians still approach RRSP planning as a two-month crunch rather than a year-round process.”

BMO says the last two weeks of February saw sales rise 200% compared to the same period last year.

Long-term fund sales climbed 80%, the bank said in a statement, suggesting that investors are beginning to focus on their individual lifestyle needs rather than on the ebbs and flows of the market.

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On the performance side, none of the 32 fund indexes tracked by Morningstar Canada lost money last month thanks to upbeat results in most equity markets, says analyst David O’Leary.

Natural resource funds led the pack, with a 6% return, followed by Latin American equity at 5.5% and Canadian small cap at 4.7%. U.S. and Canadian equity funds posted low single-digit returns.

Three indexes — U.S. money market, Canadian money market and science and technology — produced only “anemic” gains in February, O’Leary says, reporting flat returns.

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How was your RRSP season? Did you notice an increase in business in the last two weeks of February, as these stats suggest? Share your insights about this year’s RRSP season with your fellow advisors in the Talvest Town Hall on Advisor.ca.

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

(03/02/04)

Doug Watt