March madness: Another stellar month for fund sales

(April 15, 2004) For the third straight month, Canada’s mutual fund industry posted strong sales, but experts don’t expect the good times to last.

March net sales totalled $4.1 billion, IFIC said today in its monthly fund report, a 20% decline from February.

“Sales for March are normally high as it is expected that a large amount of funds are invested on the last day of RRSP season (March 1); however, this month’s net sales are the highest March sales since 2000,” said IFIC president Tom Hockin in a statement.

“This is a continuation of the recovery in sales we’ve been having this year,” says Rudy Luukko, investment funds editor at Morningstar Canada. “It’s not a spectacular number, but it’s a good solid number.”

In general, it was a robust RRSP season, the best in three years. For the first quarter, net sales totalled nearly $11 billion, compared to a $90 million Q1 loss in 2003.

Still, there’s a sense that the fund industry could be in for a bit of a slowdown in the coming months.

“Sales dropped off almost immediately after the middle of March,” said CI Funds president William Holland yesterday in a conference call. “In April, we’ll probably be positive by about $10 or $20 million, it’s slowed down considerably.”

“Canada is clearly not seeing the flows the U.S. fund market is — we’re still in a very challenging period,” Holland added.

Outside of the summer, April is traditionally one of the weaker months of the year for fund sales, notes Luukko. “There’s a natural fall-off following RSP season and it’s crunch time for people doing their taxes. There is a seasonality to fund sales, so I fully expect a drop-off in April.”

Total fund industry assets under management fell slightly in March compared to the previous month to $464.6 billion. That’s not a surprise, considering March was a poor month for the stock markets, says Luukko, pointing out that 21 of the 32 fund indexes tracked by Morningstar Canada were in negative territory last month. “So the fund industry didn’t get much help from market appreciation,” he says. However, industry assets are up nearly 26% from this time last year.

Similar to previous months, the bond and income and dividend and income fund categories generated the most new money, nearly $2 billion as investors continued to favour income funds. Balanced funds brought in more than $900 million, equity funds attracted about $600 million and money market net sales were $461 million.

“Over the last four years, there has been a strong shift of investor preference from equities to balanced and other income-oriented products,” says Luukko. “That indicates people have long memories of the last downturn in the markets.”

Of the top five fund companies, only the number-one firm, RBC Asset Management, managed an asset increase in March. Investors Group, CIBC, AIM Trimark and Mackenzie all posted modest losses.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com