Fund sales start RSP season on a high note

(December 15, 2004) The beginning of RRSP season helped boost mutual fund sales in November, with net sales of long-term funds hitting their highest point since April 2004, according to the latest data from IFIC.

“Net sales for long-term funds for the month of November were $1 billion,” said Tom Hockin, president and CEO of IFIC. “Sales for the first 11 months of 2004 totalled $15.8 billion, compared with $4 billion in same period in 2003 and $8.3 billion in 2002.”

Gross sales for all funds, including money market funds, totalled $10.6 billion. Net sales of $574 million included $260 million in new investment and $313.9 million in re-invested distributions. In October, the industry saw net redemptions of $52 million, excluding $313.8 million in reinvested distributions.

Total assets under management reached an all-time high of $482.4 billion, up 2% from $473 billion in October and 13.9% from $423.6 billion in November 2003.

Money market funds continued to see a mass exodus, with net redemptions of $745 million (excluding reinvested distributions), despite gross sales of $3.6 billion. Reinvested distributions totalled about $70 million and total assets under management in money market funds sunk to $51.2 billion.

“Overall it was a pretty good month in the long-term funds,” says Rudy Luukko, investment funds editor, Morningstar Research Inc., pointing out that it was the best November since 2000.

“The significant redemptions from money market funds aren’t as significant as they would be if they were coming from other categories, because money market funds are really the lowest margin product that the industry offers,” he says.

While long-term funds — as a very general group — sold well, Canadian investors still show a clear preference for income generating funds with an equity slant. The top selling category was the Canadian dividend category, which had net new sales of $678 million, followed by Canadian balanced, which had $631 million in inflows. In third place was the Canadian income trust category, which took in $428 million, despite the relatively small number of funds and the limited scope of their mandate within the investment universe.

“At the same time the two most important core categories, Canadian equity and Global equity, are still in net redemptions,” says Luukko. “The two biggest sources of outflows, by CIFFC category, were global equity with $318 million, followed by Canadian equity with $310 million.”

There were no real company-specific factors among the global equity funds, aside from Brandes bucking the redemption trend. Within the Canadian equity category, the three funds with the highest redemptions were all AIC, led by AIC Diversified Canadian with $89 million in redemptions.

Among the top-selling firms, Brandes and TD Asset Management led the pack in a virtual dead heat with total net sales of just over $164 million each. Third place went to Manulife Mutual Funds with $153 million.

The bottom three sellers represent the large firms that cater to the independent advisor channel, with AIC hit by net redemptions of $279 million, followed by AGF with $264 million and Fidelity with $232 million.

Luukko points out that it is still too early to tell if Fidelity’s lower fees, announced November 24, will affect the firm’s sales. The new fee structure will not come into effect until January.

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