Money market sales dominate: IFIC

Mutual funds sales crept higher in September, marking an uptick in a month that often sees a downturn, according to the latest statistics gathered by IFIC. Net new sales totalled $1.1 billion, up from $744 million in August, but were still significantly lower than the $1.8 billion in new cash invested in September 2005.

Net sales for all funds, including reinvested distributions, totalled $2.1 billion, down from $2.8 billion a year ago. Total net sales rang in at $2.1 billion, including $999 million in reinvested distributions.

The increase in net new sales masks an underlying caution amongst investors, however, with flows heavily in favour of money market funds. The combined sales of domestic and foreign money market funds accounted for $929 million of total sales.

“As predicted, investors bought heavily into money market funds in September,” said Joanne De Laurentiis, IFIC’s president and CEO. “The last time monthly money market sales were this high was in December 2001.”

The $852 million in net new sales of domestic money market funds marked a 110% month-over-month increase. Still, on a year-to-date basis, the category remains in net redemptions, totalling $1.8 billion.

But the vast majority of these money market flows were into just two funds, points out Rudy Luukko, investment funds editor for Morningstar Canada.

“Within that money market category, TD Premium Money Market was the top selling fund in the country, with $349 million, followed by RBC Premium Money Market, with $335 million,” he says.

“These monthly figures for money market funds do not really indicate a shift on the part of retail investors.”

He points out that these two funds require minimum investments of over $100,000, placing them out of reach for the majority of retail investors. The most likely source of these flows were institutional investors reallocating their books.

“Strip away those two funds and you’re left with a month where you had a not-so-grand total of about $159 million in long-term sales and $245 million in money market,” Luukko says. “This was very much a month where investors sat on their hands and didn’t want to make much of a new commitment to any type of fund.”

“It was the worst September in sales of long-term funds since September 2002.”

Luukko chalks the poor sales performance up to investor wariness, as the slumping resource sector weighed heavily on Canadian markets.

Balanced funds were the biggest sellers for long-term funds in September, despite a 10.6% drop-off, with net new sales of $482 million. Reinvested distributions added another $397 million to balanced-fund holdings, meaning that Canadians now hold $162 billion in these funds.

Broken down by CIFSC category, Canadian Income Balanced funds have attracted $4.1 billion in new flows year-to-date, followed by Canadian Dividend and Equity Income with $3.9 billion and Canadian Bond with $3.3 billion.

The least popular fund categories in September were the domestic and American equity groups, which had net redemptions of $501 million and $195 million, respectively. Using CIFSC groupings, Canadian Equity has seen year-to-date redemptions of $2.2 billion.

Industry-wide assets under management increased in September to $610 billion, up 0.3% from $608.1 billion in August. Assets are up 10.1% from last September’s figure of $554.2 billion.

Deposit-takers continued their dominance of the industry in September. The massive inflows to their premium money market funds boosted RBC and TD to the top of the sales chart, with net inflows of $472 million and $451 million, respectively. Dynamic was a distant third place, having net sales of $82 million, edging out CIBC’s $81 million. Rounding out the top five was Desjardins, with $61 million.

On the flip side of the coin, large independents saw the largest outflows. AIM Trimark posted redemptions of $220 million, followed by Franklin Templeton with $145 million and Mackenzie with $107 million. AIC had outflows of $75 million.

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

(10/16/06)

Steven Lamb