July fund sales highest in seven years

(August 15, 2005) July was another strong month for the Canadian mutual fund industry, as net new sales totaled $1.9 billion, according to IFIC.

“Investors want financial products that offer them flexibility, diversification and professional management — the hallmarks of mutual funds,” said John Murray, IFIC’s vice president of regulation and corporate affairs. “That’s why July net new sales rang in at $1.9 billion — the highest July since 1998, giving the industry year-to-date net sales figures of $14.8 billion, the highest year-to-date numbers since July 2001.”

“It was a much better month than July of the year earlier,” adds Rudy Luukko, investment funds editor at Morningstar Canada. In comparison, net new sales for July 2004 were only $543 million, and in 2003 July saw sales of just $321 million.

“One thing that hasn’t changed is that a year ago in July, money market funds were being redeemed to the tune of $249 million,” he says. “That figure is remarkably close to this month’s $291 million figure. Investors continue to seek alternatives to low-yielding deposits or money market funds.”

Including $664 million in re-invested distributions, sales climbed to $2.6 billion. Gross sales across all categories, including money market funds, were $11.2 billion, while total assets under management increased 3.3% from June to an all-time high of $544.5 billion.

Income-oriented investing remains in fashion, with four of the top five selling funds focused on putting cash back into the hands of investors. Investors showed a preference for balanced funds, which accounted for $1.1 billion in net new sales — $1.3 billion including re-invested distributions — and Canadian investors held $113.7 billion in balanced funds at the end of July.

Dividend and Income funds and Bond and Income funds sold well, totaling $895 million and $634 million, respectively. Income Trust based funds posted sales of $294 million.

RBC Monthly Income was the top selling fund in July — excluding the effects of clone fund mergers — attracting $222 million in new cash. Second place went to TD Canadian Bond, with $167 million in new sales. CI Signature High Income brought in $135 million, followed by Trimark Income Growth, with $126 million and Mackenzie Ivy Global Balanced, at $117 million.

“It was a month dominated by the bank-owned firms.” says Luukko.

The top five fund companies were RBC with $493 million in net new sales; CI Funds with $266 million; TD with $248 million; BMO with $227 million; and Philips Hager & North at $130 million.

AIC continued to experience the highest net redemptions, at $211 million, followed by AGF with redemptions of $139 million. Rounding out the bottom three was Scotia, with redemptions of $128 million, largely due to a $125 million withdrawal of cash from its money market fund.

Despite strong equity performance in Canada and Europe, where major indices have posted double digit year-to-date growth, net sales of Canadian Equity, Foreign Equity and U.S. Equity, were all negative in July, along with Money Market funds.

“Unfortunately, there has been a historic tendency for investors to jump in after the big numbers have already been reported,” says Luukko. “One of the responsibilities that financial advisors have is to go over their client’s choices and make sure they are based on reasonable asset allocation.”

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