Mutual funds falling out of favour, survey suggests

(April 3, 2003) Canadian are feeling less confident about mutual funds and stocks, instead preferring more secure investments, such as real estate and fixed income, according to a survey released today by Manulife Financial.

Manulife’s quarterly investor sentiment index, conducted in mid-March just before the invasion of Iraq, reveals that 36% of Canadians believe it’s a good time to invest in mutual funds. Nearly 40% said it was a bad time.

Seventy per cent of Canadians favour investing in their own homes, the most popular investment category, followed by real estate. Fixed income, including GICs and annuities, also gained compared to the previous survey, as did cash. Concern about the bear market reduced investor interest in stocks. Nearly half of those surveyed said they viewed equities as a poor investment choice in the current climate.

Conversely, 61% said now was a good time to invest in registered education savings plans while 38% indicated a preference for segregated funds.

“The latest survey suggests Canadians are showing strong confidence in their long-term goals, but are clearly leaning toward more secure investments than usual,” says Manulife executive vice-president Bruce Gordon.

“Four years of our polling shows that most Canadians traditionally favour safer places to invest,” Gordon added.

The past RRSP season featured dramatically lower mutual fund sales in the traditionally strong months of January and February. Combined, net sales in those two months were just $16 million, compared to $6.7 billion last year, a 99.8% decline.

And things aren’t expected to improve in March. According to preliminary estimates released yesterday, net fund redemptions could be as high as $400 million.

“Historically, net sales for the month of March have declined from the previous month following RRSP season,” said Investment Funds Institute of Canada president Tom Hockin. “Net redemptions are likely due to outflows from money market funds as investors realign their RRSP portfolios following the end of the RRSP season.”

Detailed fund sales figures for March will be released on April 15.

Are the results of this survey similar to what you’ve encountered with your clients lately? Are you facing nervous clients who are looking for alternatives to mutual funds and equities? Share your thoughts and outlooks with your peers in the “Mutual Funds and Other Products” forum of the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca