June fund sales hit seven-year high

(July 15, 2005) The Canadian mutual fund industry attracted $1.8 billion in net new sales in June, the highest for the month since 1998. Investors are continuing to move into longer-term investments, the IFIC data suggests. At the same time, industry competition and clone fund consolidation are both starting to have an effect on sales.

Total assets under management increased 1.3% from May to an all time high of $526.8 billion. It is also the eighth time in the last 10 months that assets have increased. Gross sales for the month, including money market funds, totaled $13.7 billion.

“Essentially all of those sales, industry wide, were in the long term categories,” says Morningstar Canada investment funds editor, Rudy Luukko. He says investors continue to shy away from global equity funds in favour of Canadian balanced funds, bond funds, dividend funds and income trust funds.

“Long term, domestic and income oriented were the principle characteristics of all top selling funds,” says Luukko. Global equity funds meanwhile suffered nearly $208 million in net redemptions last month, making the category the biggest laggard across the board.

On an individual fund basis, the RBC Monthly Income Fund gained nearly $219 million in June, making it one of the top sellers, while the Fidelity Northstar and Fidelity International Portfolio both benefited on paper from the company’s efforts to eliminate RSP clone funds from their lineup. The funds reported $504 million and $334 million in net new sales respectively in June, largely as a result of how transfers from RSP clones were reported.

“This pattern is going to be repeated across the industry in the next couple of months,” says Luukko. Fidelity wound up 17 clone funds on June 24, a move that affected nearly $1.2 billion in assets.

Competition and strategic manager changes meanwhile affected sales for third and fourth place top sellers.

The Synergy Tactical Asset Allocation and Synergy Canadian Class funds both saw net new sales of $241 million and $231 million respectively, when parent company CI Investments dropped Fidelity Canadian Asset Allocation and Fidelity True North funds from Clarica segregated fund portfolios in favour of the two Synergy funds.

In total, Fidelity suffered $615 in net redemptions during the month, losing $362 million from CI and another $178 million in connection to similar switches made by TD. Luukko says both moves were company specific decisions to use in-house asset managers, “rather than a thumbs down on Fidelity’s attributes as an investment manager.”

Following the Fidelity funds, the AIC Diversified Canada had a rough month with $190 million in net redemptions, and the TD Dividend Growth fund lost nearly $185 million.

Overall CI posted the highest numbers with $519 in net new sales, including funds transferred from Fidelity, TD came in second place with $474 million in net new sales, and RBC Investments was third at $431.

Laggards include Fidelity, followed by AIC with $380 million in net redemptions and AGF with $169 million in net redemptions for the month.

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com