Fund sales on a roll in January

Canada’s mutual fund industry enjoyed brisk sales in January, as investors pumped $1.6 billion in net new cash into funds, according to the latest data from IFIC. Including $533.1 million in re-invested dividends, net sales totaled $2.1 billion for the month.

“It was an excellent month for sales of long term funds — the highest since 1998,” says Rudy Luukko, investment funds editor at Morningstar Canada. “This was masked by the overall total, because there were fairly hefty redemptions in the money market category, particularly Canadian money markets.”

Total assets under management increased 3% over December, to $587.3 billion. Gross sales for the month of January, including money market funds, totaled $13.5 billion. Money market funds, which have seen steady redemptions in recent years, saw redemptions spike to $884 million in January.

On the surface, the total net new cash appears to present little change from December, when $1.7 billion in net new cash was invested. But look a little deeper and it appears Canadians are starting to heed warnings that the domestic market is fully priced.

“January foreign equity sales rose to $133 million following 21 straight months of net redemptions,” says Joanne De Laurentiis, president and CEO of IFIC. “It’s taken a bit of time, but Canadians are apparently now taking advantage of the removal of the foreign content limit.”

Based on IFIC definitions, balanced funds proved the most popular with net new sales of $965 million, raising Canadian investors’ holdings in this category to $127.3 billion. Income oriented funds remained immensely popular as well, with net new sales totaling $766.8 million in the Dividend & Income category and $704.8 million in the Bond & Income category. Canadian equity and U.S. equity funds saw redemption of $54.4 million and $55 million, respectively.

Slicing the data according to Canadian Investment Funds Standards Committee (CIFSC) categories, the trend toward income generating funds remains apparent. The Canadian dividend category took in $732 million, says Luukko, followed by Canadian bond with net sales of $663 million and Canadian income balanced, with sales of $554 million.

“It would have been an even better month for the industry is some of the other core long-term categories had pulled their weight,” Luukko adds, pointing to the CIFSC-defined Canadian equity funds, which saw redemptions of $318 million.

Luukko says the CIFSC-defined global equity category only saw net sales of $28 million, and that sales would have been negative were it not for the “notable exception” of Mackenzie Cundill Value fund, which posted net sales of $209 million.

RBC was the top selling fund company, with net new sales of $696 million, which Luukko attributes to the bank’s massive distribution channel. TD ranked second, with net new sales of $369 million, with Dynamic selling $340 million. Rounding out the top five were BMO and CI, with net new sales of $174 million and $146 million, respectively.

Among those firms with net redemptions, AIM Trimark saw outflows of $396 million; while Scotia saw redemptions of $197 million &#151 although Luukko points out that the bank’s distribution network has been focusing its marketing efforts on its Scotia Partners Portfolio program, which is not included in IFIC’s calculations. AIC continued to see redemptions of $176 million, while outflows totaled $74 million at AGF and $60 million at National Bank.

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