Net fund sales slide in September

(October 15, 2003) Investors continued to cash out of money market funds, driving September’s net sales of mutual funds into negative territory, according to IFIC’s monthly industry report.

Gross fund sales hit $8.3 billion, with reinvested distributions accounting for a $648 million of that total. There was an outflow of $885 million from money market funds, but long-term funds sales were a bright point in the report.

“Net sales of long-term funds were $505 million for the month of September, the highest month since February 2003,” said Tom Hockin, IFIC’s president and CEO. “This also marks the fifth straight month that net sales have been positive in the long-term category.”

“The numbers are very representative of what we’ve seen over the past several months — money flowing out of equity funds, money flowing into bond and income funds,” says James Gauthier, a mutual fund analyst with Dundee Securities Corp.

Equity funds have been negative since June 2002, while income fund sales have been positive over the same period, which the exception of one month. He points that there have been outflows of $6.7 billion from equities, while at the same time $6.8 billion in net sales for income funds.

“People have been looking for yield, and they’ve been looking for conservatism, anything that has a reasonable track record,” says Gauthier. “I think they’re waiting for a period of decent-looking one-year returns. If you look at October 30 returns, we’re finally going to see some pretty good comparable numbers and I think we’re going to need to see a bit of that before investors get comfortable enough to want to go back into the equity market.”

Total assets under management by funds reporting to IFIC sagged from $412.9 billion in August to $408.9 billion in September, although total assets were up 7.3% from September 2002.

Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca