Money markets drag fund sales lower

September is traditionally a troubled month for the investment industry, and though mutual fund returns were largely positive, actual sales were in negative territory, according to preliminary data from the Investment Funds Institute of Canada (IFIC).

The industry posted net redemptions of between $475.9 million and $975.9 million for the month. If there is a silver lining, it is that less lucrative money market funds are the primary drivers of redemptions.

“Since April, we have seen strong long-term fund sales coupled with weak money market fund sales in what we see as investors cautiously moving off the sidelines,” said Pat Dunwoody, vice-president, member services and communications, with IFIC.

“Investors have been accessing equity markets predominantly through balanced fund options this year, and we expect to see that trend continue when we see the final data on [October] 15th.”

Total net assets of the mutual fund industry are estimated to be between $578.8 billion and $583.8 billion at the end of September, up 2.41% from $567.6 billion in August.

RBC Asset Management and Phillips, Hager & North reported $1.2 billion in net redemptions, despite $543 million in net long-term fund sales. Money market net redemptions totalled a whopping $1.8 billion.

“We continue to see strong sales of our portfolio solutions. At the same time, investors continue to redeploy their money market fund assets,” said Doug Coulter, president of RBC Asset Management.

TD Asset Management reported similarly strong long-term fund net sales, totalling $564 million for September, while money market funds were also hit with net redemptions of $393 million. Overall, net sales totalled about $171 million.

“September is traditionally one of the more challenging months in our industry. We’re seeing a continuation of the momentum that began in May,” said Tom Dyck, president with TD Mutual Funds. “This is a testament to the quality of our investment management and the value of our funds.”

DundeeWealth had long-term mutual fund net sales of $218 million and short-term mutual fund net sales of $93 million. The short-term net was boosted by a $110-million purchase from a single institutional investor.

AGF Management reported overall net redemption of $94.9 million, with a net $80.1 million pulled out of long-term funds and a net $14.8 million in money market redemptions.

(10/05/09)