Money markets boost fund sales in July

The Canadian mutual fund industry posted relatively solid sales in July, according to data from IFIC, ringing up net new sales of $854 million. Add to that $615 million in reinvested distributions, and total net sales reached $1.5 billion. In terms of net new cash, July was the best month since March.

However, Rudy Luukko, investment funds editor, Morningstar Canada, points out that “sales were down sharply from a year earlier. The most recent total is less than half of the sales reported a year earlier, totalling $19 billion. The decline was especially pronounced in long-term funds, where in the most recent month we saw $678 million, down very sharply from $2.2 billion a year earlier.”

There was a definite trend toward conservative investment in July, with balanced and income-oriented funds by far the best performers.

“Balanced funds continued to be the fund category of choice for investors last month, with balanced funds accounting for more than 67% of total sales in July,” said Joanne De Laurentiis, president and CEO of IFIC.

Using IFIC’s fund categories, balanced fund sales totalled $577.6 million, while the dividend and income category recorded the second best sales, totalling $180.4 million in net new sales. Investors dumped $178 million in net new cash into domestic money market funds, making it the third best-selling group.

Breaking sales down by the more narrowly defined categories of the Canadian Investment Funds Standards Committee (CIFSC), Canadian income-balanced funds raked in $221 million, followed by Canadian balanced, with net new sales of $176 million.

Canadian dividend and equity income brought in $146 million in new cash, and Canadian bond funds gathered $117 million. Canadian money-market funds rounded out the top five with $106 million.

“You can detect something of a long-established conservative trend there,” Luukko says. “Even when the market outlook is less than rosy, Canadian investors still appear to make new commitments to balanced types of products and portfolio funds.”

At the back of the pack — and using CIFSC categories — Canadian equity funds posted net redemptions totalling $142 million, while North American equity funds saw net out-flows of $97 million.

“Equity fund sales were generally weak — domestic equities were weaker than most,” Luukko says. “This is perhaps a reflection of the message that investors are hearing from the fund companies and from their financial advisors that the Canadian market is very heavily concentrated in just three industry sectors and that it makes sense at this time to move some more money into foreign investments.”

International equity funds attracted $45 million in new cash, while European equity and U.S. equity funds were in a virtual dead-heat, with net new sales of $36 million and $35 million respectively.

While this most recent July saw higher overall sales than that of 2004, Luukko points out that this is a function of the higher sales of money market funds this year, and that long-term funds sold much better two years ago.

“Given the geopolitical crises that have been afflicting the world in recent months, investors have been shying away from new commitments to [long-term] mutual funds,” Luukko suggests. “Really, the July sales of long-term funds are the lowest since 2003, when sales were just $463 million.”

The top-selling fund company was RBC, which pulled in $339 million in new cash. A distant, but strong second place went to CI, which attracted $173 million. Dynamic saw net inflows of $79 million, followed by Investors Group with $68 million and TD with $66 million.

AIM Trimark posted the highest net redemptions, with $193 million in outflows, followed by CIBC with $71 million. Net redemptions at BMO totalled $65 million, while AIC and MD Management posted outflows of $58 million and $23 million respectively.

All fund companies reporting to IFIC posted increases in assets under management. The industry as a whole saw its AUM climb 1.7% for the month, to $599.2 billion. That’s up 10% from the total of $544.5 billion reported in July, 2005. De Laurentiis says year-to-date net sales stand at $12.2 billion.

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

(08/15/06)

Steven Lamb