February fund sales hit five-year high

(March 15, 2005) Canadians poured $5.3 billion into mutual funds last month, the best February the industry has seen since 2000, when net new sales reached $6.5 billion.

Overall, it was a strong RSP season, with January and February sales combined nearing $6 billion. Still, that’s weaker than last year, when RSP season generated $6.8 billion in net new sales.

Gross fund sales in February were $16.6 billion, including $4.1 billion in money markets funds. However, the bulk of net new sales were in long-term funds, with money market funds in net redemption overall.

“In February, all but $173 million [in sales] was in long-term funds, so a healthy $5.3 billion without a lot of the low-margin product in there,” says Rudy Luukko, investment funds editor at Morningstar Canada.

Industry assets rose 3.4% from January and 11% compared to last year to $517.6 billion.

Among fund categories, there was a turnaround for Canadian equity, with $295 million in net new sales last month, Luukko notes. However, the gain in equity funds was primarily on the Canadian side. Other than money market, the category with the most redemptions last month was global equity.

The most popular fund category in February was Canadian balanced at $1.6 billion, followed by Canadian dividend ($1.3 billion), Canadian bonds ($904 million) and income trusts ($518 million).

The best-selling fund was RBC Monthly Income, which pulled in $486 million. RBC also led the way among fund companies, with $1 billion in net new sales, the only firm to top the $1 billion mark. TD was second, at $740 million and Manulife Mutual Funds third, at $697 million.

Laggards included AIC, off $399 million and AGF, down $232 million. Fidelity was a distant third, $67 million on the negative side, followed by Altamira, down $59 million, despite a strong sales push by the direct sales firm during RSP season.

“Sales were unevenly distributed by firm,” says Luukko. “The rise in the tide is not lifting all boats.”

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