Mutual fund sales stuck in a slump

Sales of Canadian mutual funds continued to slow last month, as investors were shaken by equity market volatility in late May and the beginning of June. Net new sales of long-term funds totaled $297 million, down from $411 million in May, according to the latest data from IFIC.

With June marking the end of the second quarter, there was a wave of re-invested distributions totaling $1 billion, up from $574.3 million in May. Combined net sales for all funds totaled $1.3 billion.

“The traditional summer sales lull in mutual funds seems to have arrived early this year,” says Rudy Luukko, investment funds editor, Morningstar Canada. “Net new sales for all categories can be described as disappointing.”

Using same-month sales as a comparison, sales of long-term funds were at their worst since 2002.

“Sales in balanced funds continued to remain strong with sales for the first six months of this year mirroring sales for the same time last year,” said Joanne De Laurentiis, president and CEO of IFIC. “In addition, equities continue to do well. Year-to-date foreign equity sales now stand at $2.5 billion, representing more than 22% of overall sales in the industry.”

So far this year, all foreign equity categories have had positive sales, with global and international equities being the most popular. In fact, international funds were the most popular among equity funds, Luukko points out.

“Both investors and money managers are looking beyond the Canadian market, which is so heavily concentrated in three industry sectors, and also beyond the U.S. market, which has had its problems with its currency weakening in recent years,” he says.

Two of the biggest selling international funds were Imperial International Equity pooled fund and TD International Equity, marking significant inroads into a domain long dominated by independent manufacturers with sales of $323 million and $244 million, respectively.

Canadian Income Balanced funds attracted the largest inflows, with net new sales of $333 million, followed by Canadian Bond with $313 million. Third most popular was the International Equity category, with net new sales of $271 million.

Investors pulled money out of Canadian Equity funds, to the tune of $330 million, and another $305 million out of Canadian Short-Term Bond and Mortgage funds. The third most redeemed category was Canadian Equity (Pure), which saw redemptions of $215 million.

Top performing fund companies included BMO, with sales of $165 million, TD which sold $139 million and Dynamic, with net new sales of $133 million. Rounding out the top five were Philips Hager & North at $121 million and RBC with $104 million.

AIM Trimark continued to struggle, leading the industry in net redemptions, totaling $349 million, followed by CIBC, with outflows of $136 million. Franklin Templeton saw $98 million in redemptions, with Fidelity and AIC rounding out the bottom five, with redemptions of $87 million and $86 million respectively.

Assets under management for the overall industry dropped 0.5% to $589 billion, from $591.7 billion in May. Assets are up 11.8% from last June’s figure of $526.9 billion.

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