Net fund sales top $500 million in November

(December 15, 2003) Investors bought up more than half a billion dollars in mutual funds in November, according to IFIC, with $513 million in new money flowing into funds.

“This is the second consecutive month of positive sales and the fourth in the last five months,” said Tom Hockin, IFIC’s president and CEO. “Long-term fund sales were $793 million for November and continue to propel the recent string of positive sales the industry has been experiencing.”

There was an additional $247 million in re-invested distributions. Total assets under management increased 0.8% to $423.6 billion over the course of the month and stand 6.6% higher than in November 2002, when the total was $397.5 billion.

“I think the figure is significant, but the past trend of dumping money into bond and dividend funds has continued,” said Dan Hallett, president of Dan Hallett & Associates. “They’ve grabbed a disproportionate amount of net sales for some time and November was no exception.”

Money market funds continued to see net redemptions, with investors unloading $280 million from them. Investors continued to prefer income funds throughout November, with dividend income funds and bond income funds topping the net sales list with $495 million and $323 million in net sales, respectively. Balanced funds made up $217 million in net sales.

“It smacks of a classic problem in this industry — performance chasing. That said, a number of other subtrends emerge from peeking into specific fund details,” said Hallet. “Value equity funds are attracting new money, but overall equity groups continue to be mired in net redemptions.”

Most funds continued to post gains in November, according to Morningstar Canada, with 75% finishing the month with higher asset values.

Leading the pack were precious metal funds. Gold continued to climb throughout November, driving these funds higher, but analysts caution that these funds may have reached their peaks.

“Investors who have treated precious metals funds as a small but important part of a well-diversified portfolio have been well rewarded,” said David O’Leary, an analyst with Morningstar Canada, “but investors who are lured by investing here for even the short or medium term would be wise to recall the rush to technology funds during 1999 and the huge losses those funds have since suffered.”

Over the first 11 months of the year, the Morningstar precious metals fund index has risen 51.9%. In November alone, this index gained 11%, followed by the natural resources index and the Canadian income trust index, which rose 3.5% and 2.9% respectively.

The Canadian equity and Canadian dividend fund indices both rose 0.9% in November. These indices are key because they represent the highest asset values in Canada.

The worst performing funds were based in Asian equities. Only seven of Morningstar’s 35 indices were in negative territory for November.

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