Fund sales flat in August

(September 15, 2004) Mutual fund sales narrowly avoided slipping into negative territory last month, with IFIC today reporting a modest $50 million in net sales for August. That’s the worst performance for the industry since September 2003.

While net sales of long-term funds reached $377 million, those increases were offset by money market funds, which suffered net redemptions of $327 million.

“Lacklustre would be a good word to describe [the month],” says Rudy Luukko, investment funds editor at Morningstar Canada. “Last year, there were net sales of $304 million in August. But long-term fund sales were pretty much the same.”

The top-selling fund category in August was Canadian Balanced at $249 million, says Luukko, and the best-selling fund in the industry was Trimark Income Growth. Canadian dividend funds had $247 million in net new sales, while income trust funds had $183 million in sales.

“Investors are chasing performance, but they are also capitalizing on it,” Luukko notes in reference to the income trust category. “It’s no longer just a flash in the pan, but we’re not making any predictions as to the sustainability of this. Over five years, the income trust category is up 16.3%. They’ve been among the performance leaders and investors have been responding to that.”

Still, there’s a general lack of positive sales in the equity side of the fund industry. “There are exceptions, Brandes is doing well, but the general trend in the mainstream equity category is a reflection of poor returns,” Luukko explains. “Year-to-date, the median Canadian equity fund tracked by Morningstar is up just 2.1% and global equity has done even more poorly, up a scant 0.7%.”

Money market funds did the most damage in August, with Luukko pointing to very weak returns in the category: one-month returns are virtually flat at 0.1% and year-to-date returns are just 0.9%.

Canadian equity funds also suffered in August, with net redemptions of $249 million. “There was a significant AIC phenomenon at work here,” says Luukko. “Three of the four funds with the largest redemptions in Canadian equity were AIC funds.

AIC also had the highest redemptions in the industry by company last month, with $173 million, followed by AGF at $147 million and Fidelity at $142 million. “All three of those firms have been in a slump this year in terms of sales,” says Luukko. “Although all three have also made significant personnel changes over the past year in their sales and marketing departments to try to turn around this negative trend.”

Gross sales of all funds totalled $7.7 billion in August, while industry assets fell 0.4% to $468 billion. Still, industry assets are 13% higher than last year, IFIC noted.

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