Investors flock to banks’ income offerings

(May 11, 2005) Investors continued on their conservative course over the 2005 RRSP season, pouring cash into income-oriented mutual funds and largely preferring the big banks’ offerings, according to industry consulting firm Investor Economics.

A single fund has accounted for more than 10% of net fund flows in the first quarter of 2005, as the RBC Monthly Income Fund attracted a whopping $1.028 billion. That also accounts for more than half of RBC’s net inflows of $2.039 billion.

Following RBC, the top five firms by net fund flows included Manulife (14.8% of total flows), TD Securities (13.3%), CI Mutual Funds (12.4%) and BMO Mutual Funds (8.1%).

The combination of a bank and “monthly income” in a fund’s name seems to be a surefire seller, with CIBC and BMO offerings raking in $440 million and $422 million, respectively, to take the number five and six rankings in net flows.

Size of the manufacturer alone did not guarantee sales performance. Investors Group, as a stand-alone from its corporate parent IGM Financial, is the second largest fundco by assets. Yet IG only just scraped into the top 10 list for fund flows, lagging ninth place Philips Hager & North by $17 million.

CIBC’s success in the income market saved the firm from reporting net redemptions, as total net fund flows were only $236 million, dropping the firm to sixteenth place for fund flows, well behind its big bank peers.

Only two non-income oriented equity funds cracked the top 20 flows list for the first quarter, according to Investor Economics’ Insight newsletter, with CI Canadian Investment Fund and Fidelity Northstar Fund attracting $398 million and $376 million, ranking them seventh and eighth, respectively.

While the banks continue to dominate the fund scene, there is some good news for the independent fund companies, as Dynamic managed to claim the number six spot on the fund flows list. Over the past couple of years, the firm has been wallowing in net redemptions, so a return to positive flows points to hope for others in the same boat, notably AGF and AIC.

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