Fund sales soar at year end

Net new fund sales for the month of December totaled $2.4 billion according to IFIC’s monthly statistics report, the highest net sales for a December since 1996.

The net assets of the industry grew from $652 billion to $660 billion, a 2.2% increase from November and a growth of 15.8% for the year. But despite double-digit growth, it took the strong sales of November and December, the traditional beginning of RRSP season, to salvage the year.

“There was a resurgence in sales in what had been a rather disappointing year overall,” said Rudy Luukko, investment funds editor, Morningstar Canada. Luukko said that the high sales numbers in December followed a year-long trend of increased investment in global equity and balanced funds.

The IFIC reports that balanced funds and foreign common shares were the best-selling asset categories during the month, with close to $1.5 billion and $890 million in net sales, respectively. This helped balanced funds finish the year with $13.2 billion in net sales, with foreign equity funds following with a yearly total of $6.7 billion.

“For the entire year, the results were mixed between domestic and foreign funds. In the most recent months, though, the most favoured category was global balanced,” Luukko said. “This was the prevailing trend of 2006. It was the first full year where there were no foreign-content restrictions in registered plans. Investors and their advisors seemed to have taken advantage of that.”

As a foreign asset class, Global Equity, finished in the top five.

On the flipside of the shift toward foreign investment, the IFIC stats show that Canadian domestic funds had the largest redemptions of 2006, with $7.3 billion redeemed. Luukko points out that the shift away from Canadian equity does not underline an inherent weakness, as Morningstar’s Canadian indices had returns on average better than 15%. But returns in excess of 30% were to be found in Europe, East Asia (excluding Japan) and emerging markets, which led investors to sell off their domestic holdings.

Luukko credits for the high returns “a combination of not only greater freedom to invest outside of Canada but also strong market performance and a growing desire by Canadian investors to diversify beyond the Canadian market, which globally is very small and heavily weighted in certain areas — mainly the financial sector and resources.”

RBC Asset Management continued to lead the pack with more than $545 million in sales in December; it was followed closely by TD Asset Management at $535 million. Among the independents, AGF continued its comeback, with $181 million in sales.

Strong sales prevented any net redemptions above $50 million, Luukko pointed out. “It was a month when there were no big losers in terms of absolute values of assets redeemed. A rising palette of sales to a very large extent has pulled everyone, with rare exception, into the positive sales category.”

Those exceptions include AIC with the largest net redemptions, at approximately $47 million, followed by HSBC, at $36 million, and Altamira, at around $30.6 million.

Income funds continued their steep slide, the result of the federal government’s tax changes in the fall. Full-year sales of dividend and income funds fell to just $5.6 billion from $13.6 billion in 2005. They finished the year at an AUM paltry growth of 1.2%.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com