Fund industry sales reached $3.6 billion in March

Long term mutual fund sales continued to move along at a healthy pace in March, with IFIC reporting $3.6 million in net new sales for the month. Despite the allure presented by resource funds in Canada, investors continued to gravitate towards balanced, income-producing investments and finally began to buy into the global investing story being pushed by fund companies.

The $3.6 billion total was up from $3.3 billion in March 2005. Net sales for all funds, including re-invested distributions, stood at $4.7 billion for the month. Sales numbers for the quarter reached $9.6 billion, roughly on par with first quarter numbers reported in 2005.

“There’s been a healthy increase in long term sales, the industry’s bread and butter,” says Rudy Luukko, investment funds editor at Morningstar Canada. “There are significant pockets of weakness which drags down sales, but most of the action this month has been happening in the long term funds.”

Overall, investors are still buying into domestic equity funds, but generally seem to prefer blue chip, dividend paying funds, rather than funds in the mainstream Canadian equity category. Global and international equity funds, meanwhile, made reasonable inroads during the month, putting global equity funds in the list of top sellers for March, but the trend did not necessarily translate into better sales for everyone in the sector.

Luukko says “despite the positive sales in the global equity category, there were a number of prominent global equity funds that had significant net redemptions. The recovery in global equity sales is not an across the board trend, it appears to be rather manager specific.”

The Mackenzie Cundill Value and the Mackenzie Cundill Recovery funds, for example, reported $257 and $211 million in new sales last month, followed in the category by the Fidelity Northstar Fund with a reported $145 million in new sales. Compared to this, a number of prominent global equity funds, including the AGF International Value, Templeton Growth and Trimark Select Growth funds, all suffered net redemptions during the month.

Trimark Income Growth was listed as the most redeemed fund during the month with $330 million in net redemptions. Along with the Mackenzie Cundill Value and Recovery funds, CI’s Signature Canadian Balanced Fund, the CIBC Monthly Income Fund and TD’s Canadian Bond Fund rounded out the list of top sellers during the month.

The top five selling categories this month include Canadian dividend funds, Canadian income balanced funds, Canadian balanced funds, global equity funds and Canadian bond funds. Most redeemed categories this month included Canadian money market funds, Canadian equity funds, U.S. money market funds, science and technology funds and Canadian tactical asset allocation funds.

Top selling firms include RBC Asset Management with $719 million in net new sales, TD Asset Management with $592 million in net new sales and Mackenzie Financial Corporation with $332 in net new sales, followed by Bank of Montreal, Investors Group and Dynamic Mutual Funds. Laggards include AIM Trimark with $668 in net redemptions and AIC with a reported $140 million in net redemptions, followed by CIBC Asset Management with $70 million in net redemptions.

At AIC, the most redeemed fund was the AIC Diversified Canada Fund with $59 million in net redemptions. A large chunk of AIM Trimark’s redemptions, meanwhile, can be attributed to changes in Clarica’s lineup of segregated funds. In March, CI Financial changed sub-advisors on four of Clarica’s segregated funds replacing the underlying AIM Trimark funds with CI managed funds. More than $360 million changed hands during the management shuffle, boosting CI’s net sales for the month to $772 million.

Even though bond funds have far lower returns than they did a number of years ago, and that is unlikely to change in the near term, they are still in positive net sales as part of this broader trend towards Canadians favoring income yielding, long term funds, notes Luukko. “In general, income producing long term categories reasserted their dominance in fund sales.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com

(04/17/06)