Long-term funds continue sales streak

Net redemptions from the mutual fund industry for October came in near the lower end of initial estimates, totalling $291.4 million, according to the final tally by the Investment Funds Institute of Canada (IFIC).

Early forecasts had set a range of between $262.2 million and $762.2 million in net redemptions. IFIC ascribed the slower sales to the downturn in the markets, as most major equity indexes took a breather from the rally that started in April.

Total industry assets declined by 1.7% from September to $573 billion. That’s still an increase of 9.7% year-over-year.

Even better news for the industry is that long-term funds saw healthy inflows totalling $2.24 billion, continuing a trend of positive net sales since April.

Far less lucrative money market funds accounted for the negative overall sales, with net redemptions of $2.54 billion. Investors continue to hold $59.3 billion in money market funds, accounting for just over 10% of total industry assets.

About $12 billion have flowed into long-term funds since the start of the year, compared to $9.26 billion in net redemptions over the first 10 months of 2008.

Balanced funds were the most popular category, with net sales of $1.62 billion suggesting investors are willing to dip their toes back into the risk pool, while holding onto the relative safety of the fixed income component. So far balanced funds have attracted $7.51 billion in net sales, compared to just $685.3 million at this point last year.

Global Neutral Balanced funds posted net sales of $425.9 million in October, down from $476 million in September but up from the $804.4 million in net redemptions posted in October 2008.

Canadian Neutral Balanced funds saw net inflows of $419.1 million.

Bond funds were popular as well, as investors placed $1.14 billion in new money in the relatively safe debt markets. So far this year bond funds have attracted $9.8 billion, compared to $654.8 million in net redemptions in 2008.

Within the debt segment, Canadian Short Term Fixed Income funds were the best sellers, with $699.5 million in net sales. This category has been the best-seller for the four months straight, and has year-to-date net sales of $4.74 billion.

Fund-of-funds attracted $1.13 billion in net sales for the month, and have seen year-to-date sales of $6 billion, compared to $3.59 billion at this point in 2008.

Pure equity funds continued to post net redemptions, but at least the pace seems to be slowing. Investors pulled out $512.2 million in October, compared with $2.4 billion in October 2008. On a year-to-date basis, redemptions have totaled $4.83 billion, compared to $10.29 billion at this point last year.

(11/16/09)