Fund sales success concentrated

(July 30, 2004) While mutual fund sales have continued to turn in positive monthly performances so far this year, some startling trends have emerged, according to the July issue of Investor Economics Insight.

The strongest inflows were not only concentrated among a handful of manufacturers, but were also concentrated among key funds at those firms. For example, RBC has seen $2.6 billion in positive flows in the first half of the year, with over $1 billion heading into its Monthly Income Fund alone.

“The roster of winners continues to highlight the importance of distribution and innovation,” reads the July issue of Investor Economics Insight. “While the banks have held a distribution advantage for some time, this is the first year when they appear to have exploited it beyond their core RRSP season.”

But the banks are not the only ones that have found a way to stem their outflows. While Canada’s big independent fund companies have been languishing — read AIC, CI and AGF — Mackenzie and Franklin Templeton turned in some of the best sales in recent months.

“We are now seeing Franklin Templeton boost its fortunes through its Quotential Program,” the report says. “Launched approximately 18 months ago, its offerings have expanded since then and are gaining popularity with investors looking for portfolio solutions.”

The program has grown more than 1,600% in its first year and a half and about half of Franklin Templeton’s May fund sales came through its balanced Quotential portfolio.

Of course, part of the blame for stagnating fund sales can be laid at the feet of the uninspiring market performance, typical of the summer months. But researchers at Investor Economics warn that this is only part of the picture.

“The slower sales environment isn’t simply the consequence of a traditional summer slowdown — we also continue to see redemptions trending higher,” the report warns. “Although still at the low end of the spectrum by historical standards, redemption rates have now returned to the levels of early 2003.”

Annual redemption rates of long-term investment funds hit 14.2% in June — a level not seen since January of 2003 — in a trend that has persisted for the past six months.

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