Mutual fund assets still on the rise

It’s been another stellar month for mutual fund sales as total assets grew 1.7% to $712 billion. The Investment Funds Institute of Canada released its May statistics on Friday, which showed nearly every category breaking records.

“It was a booming month of May — and in sharp contrast to most of the past five years, when this has been a very weak month for fund sales,” says Rudy Luukko, investment funds editor at Morningstar Canada.

Year over year, total mutual fund assets have grown by $119.4 billion, 72.5% of that a result of market effect. The other 27.5% is due to net sales.

Luukko says the mutual fund frenzy is a result of the lax foreign content rules and a new interest in global investing. “We’re a couple of years into having freedom to invest wherever we want in registered plans, and mutual funds enjoy an advantage over direct investing in foreign markets,” he says.

Long-term mutual funds made some major gains, ending May with $663.8 billion, a 20.4% increase over this time last year.

The fastest-growing funds were of the global balanced variety, growing 37% year over year. Close behind is the global and international equity funds, with $114.9 billion in assets in May, and a 12-month growth rate of nearly 36%. According to Luukko, these numbers prove that investors have a slightly conservative bent.

“The favourite investment du jour last month and so far this year is global balanced. They were strong last year, but more than doubled sales from a year earlier,” he says. “On the home front, Canadians are still investing portfolio-style funds, either balanced funds or funds-of-funds. So it seems there’s a strong preference for these ‘packaged solutions’ as opposed to stand-alone asset classes.”

In Canada, assets of domestic equity funds increased by 3.2% over April and 13.8% year over year to $200 billion, while domestic balanced funds grew 1.8% from last month to $67.4 million.

The only two categories to lose ground from April were the domestic fixed income and global and high-yield fixed income funds, dropping 1% and 0.4% respectively.

When it comes to mutual fund net sales, domestic and global balanced were the best-selling broad asset categories in May. Domestic balanced hit $1.3 billion in net sales, while global reached $1.1 billion.

Year over year, global and international equity net sales improved the most, reaching more than $8.5 billion in 2007 — a $5.8 billion change over last May. A close second was global balanced, which jumped from about $3 billion in 2006 to about $7.5 billion today. Overall net sales of long-term funds were up about $7 billion to $21.8 billion.

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com