Fund sales fall flat in October

(November 15, 2004) Canadians sold off mutual funds in October, with net redemptions of $52 million, according to the latest monthly data from IFIC. That marks an improvement of more than $500 million in redemptions in September.

“This is really just a continuation of a trend away from money market funds, which are not perceived as offering good value when compared to other short-term saving alternatives, or the long-term income oriented funds,” says Rudy Luukko, investment funds editor at Morningstar Canada. “Canadian fund investors are seeking income, but they aren’t satisfied with the yields at the short end of the market.”

Luukko points out that investors continue to sock their cash away in dividend and income funds, which remained the most popular category, attracting $703 million in net sales. “Income trusts had net new sales of $316 million and this is a category that only has about $12 billion in assets. According to the Morningstar indexes, it’s the second highest performing index, year to date.”

Canadian dividend funds took in roughly $407 million, but Luukko points out the total asset base is about $36.5 billion. Canadian balanced funds had net new sales of $391 million.

Canadian equity funds were hit with $348 million in net redemptions, while the global equity category was down $327 million.

“The trend as a whole remains negative for these bellwether growth oriented categories,” Luukko says. “Investors have been showing an aversion to the foreign equity categories in part because of the appreciation of the Canadian dollar versus the U.S. dollar.”

On an individual basis, income funds made up the top seven best selling funds, led by Trimark Income Growth, which took in $147.5 million. To find a non-income fund in the top sales, one has to look down to number eight, where Mackenzie Cundill Value rang up sales of $59 million, followed by CI’s Canadian Investment at $58 million. Luukko attributes their strong sales to their “excellent track record.”

“There’s no clear trend in terms of bank funds versus advisor sold funds. Fund company specific factors appear to be coming into play,” he says.

“Within the universe of fund companies reporting to IFIC, there are some wide divergences even within similar distribution channels, notably in the advisor channel,” Luukko says. “Two of the three top selling fund firms last month were most closely associated with the independent advisor community.”

While Brandes and Dynamic ranked first and third, $97 million and $92.5 million in net new sales, respectively. Between them in second place, BMO Financial was in a virtual dead heat with Brandes.

On the negative side, AGF saw net redemptions of $312 million, AIC was hit for $247 million and Fidelty saw investors cash out almost $215 million.

There was little consistency throughout the bank channel as CIBC was in fourth place for highest redemptions, at $130 million. Luukko explains that banks’ sales data can easily be skewed by poor sales in money market funds, due to their dominance in the category.

IFIC reported total industry assets under management continued to grow, now totaling $473 billion, up 0.5% from $470.5 billion in September.

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