Fund sales hit four-year high

(March 15, 2004) Net sales of mutual funds reached $5 billion in February, IFIC confirmed today, capping off the best RRSP season since 2000.

“Sales for the first two months of 2004 totaled $6.9 billion, compared with only $16 million in the same period, one year ago,” said Tom Hockin, IFIC president and CEO. “Some investors also decided not to shy away from equity funds, investing almost $1.4 billion into these funds. Assets in the industry increased by $14.6 billion from the previous month and $91 billion from the previous year to $466.2 billion.”

That $466.2 billion represents an increase of up 3.2% from January and an even more impressive year-over-year gain of 24.3% from last February’s $375.2 billion.

Investors were still showing some caution, according to Hockin, preferring balanced, bond and dividend and income funds, but there are signs they are starting to accept more risk.

“Five billion dollars is a big number for last month’s net new sales, when you consider that this is about 10 times what they were a year ago,” says Rudy Luukko, investment funds editor at Morningstar Canada. “Nearly all of the new money is flowing into longer-term funds, with only a trickle into the money market category, which also signifies a willingness on the part of the public to be investors and not just savers.”

Money market funds were in the black for a change, with $42 million in net new sales recorded last month.

But to anyone watching the industry as long as Luukko, the total may still seem a little weak compared to the mutual fund heyday.

“We’re still a long ways off from the glory days of February 1997, when the industry rang in net new sales of $10 billion, or double what they attracted last month,” says Luukko.

Perhaps the most interesting data from the IFIC report is the strengthening trend of bank-based fund sales, as RBC widened the gap between it and second-place Investors Group. CIBC, the third largest asset manager, posted better sales growth than IG as well, bringing it within $2.6 billion of second place.

But it’s the smaller players that are posting the strongest growth, as Brandes Investment Partners posted a 22% gain in assets, boosting the firm past Ethical Funds into the number 23 spot, the only ranking change in the top 25 companies.

“The independent firms who sell mainly through third party advisors are having mixed results, with some — including Brandes — doing really well, and others, including AGF and AIC, which saw net redemptions last month,” says Luukko. “Bank firms, led by RBC, are dominating the sales charts, with large inflows into their income oriented balanced funds and dividend funds.”

Royal Bank remained on top of the table, with RBC Asset Management hitting $40 billion in fund assets under management in February. The bank said it had a strong RRSP season as investors ploughed $1.58 billion into registered accounts between November 1, 2003 and March 1, 2004. Of that sum, $908 million went into mutual funds.

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“Our excellent results over the past few months reflect our concerted efforts to provide superior support to our sales teams as well as our strong investment performance,” said Brenda Vince, president, RBC Asset Management. “As a result, we saw substantial increases in both registered and non-registered mutual fund sales.”

Over the same period, RBC Asset Management posted net fund sales of $1.83 billion, despite net redemptions of $222 million in money market funds.

“The banks’ success does not signify any significant increase in the do-it-yourself type of investor, though it may indicate some resistance to deferred sales charge pricing,” says Luukko. “One of the reasons the banks are doing so well is that they have been upgrading the qualifications and advice-giving expertise of their own sales forces, so if you want to buy funds through a financial planner you can now increasingly do so through a bank, and do so on a no-load basis.”

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

(03/15/04)

Steven Lamb