Fund assets hit record high

(February 15, 2005) Canadian mutual fund assets reached a new all-time high in January, surpassing the $500 billion mark on net sales of $660.7 million.

“We have reached a landmark going past half a trillion dollars in assets,” said John Murray, IFIC’s vice-president, regulation and corporate affairs. “It is also heartening to note that most of the new sales have come from investors putting their dollars into long-term funds.”

Total assets under management increased 0.6% from December to $500.4 billion, with gross sales, including money-market funds, totalling $12.2 billion. Net sales for all funds, including $356.8 million in re-invested distributions, were $1.0 billion.

“I would characterize that as a disappointing figure in that it’s less than half of the actual year-earlier figure of $1.8 billion,” says Rudy Luukko, investment funds editor of Morningstar Canada. “But at the same time, this month is a statistical anomaly and I’d be cautious about reading too much into it.”

In its preliminary report, IFIC projected much higher sales of between $1.2 and $1.7 billion. The discrepancy is due to a one-time anomaly, involving AGF, which does not report preliminary numbers to IFIC, says Erwin Go, the fund industry association’s statistics manager.

“This happens once in a while when there’s a major transfer of funds that we are not privy to prior to our preliminary release,” Go explains.

Manulife Financial recently completed the closure of eight funds as part of its takeover of Maritime Life. This resulted in a one-time redemption of $884 million at AGF.

Redemptions in the Canadian, foreign and U.S. common-share categories limited gains for funds sales in January.

“In January 2004, there was a modest surplus of about $70 million in those categories and this January we had redemptions of about $1.6 billion. So that’s where the difference is,” says Go.

“The other thing that stands out from the sales stats are how concentrated sales continue to be in several categories, all of which are domestic-income-oriented or balanced categories,” says Luukko.

Broken down by Canadian Investment Funds Standards Committee category, Canadian balanced funds were the most popular, garnering $754 million in new funds, followed by the Canadian dividend category with $663 million. Canadian bond funds attracted $334 million and Canadian income trust funds brought in $320 million.

“People are searching for yield and they are seeking comfort investments closer to home,” says Luukko. “When you look at the redemption side, you can see how the core growth style categories are being shunned, both on the domestic side and on the foreign side.”

The category hit with the largest redemptions in January was Canadian equity, with $719 million in net outflows. Global equity funds saw an exodus of $317 million, U.S. equity $165 million, and international equity $83 million. Net outflows continued in the money-market category as well, with redemptions of $62.3 million split between domestic and foreign holdings.

The best selling long-term fund in January was the RBC Monthly Income fund, which saw net inflows of $263 million, while Trimark Income Growth brought in $195 million. The best-selling fund firms were Manulife, with sales of $539 million, RBC with $454 million and Scotia with $194 million.

Firms with the highest redemptions included AGF, at $1.15 billion, AIC with $303 million and Fidelity with redemptions of $229 million.

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