Sales results point to abysmal RRSP season

February is usually a boom time for mutual fund sales, as investors shore up their RRSP contributions to meet the early March deadline. Not this year. Sales appear quite low versus last February’s, according to preliminary sales data from the Investment Fund Industry of Canada (IFIC), something that will be viewed as a big disappointment for the beleaguered fund industry.

On the bright side, the industry did finish the month with positive sales, estimated between $1.5 billion and $2 billion. The bulk of these, though, came in the form of money market funds. The more lucrative long-term mutual fund category — the domain of advisors and buy-and-hold investors — is estimated to be around $350 million.

Against a backdrop of a severe recession, it’s probably not surprising that the usual flurry of RRSP contributions could not offset the malaise of fund investors. Still, the contrast between this and previous years is striking. Last February — by most accounts a slow RRSP season — sales of long-term mutual funds were $2.9 billion. In 2007, when markets were riding high, they were $7.7 billion.

IFIC also estimates that net assets of the mutual fund industry for the month of February will be between $473.8 billion and $478.8 billion, down approximately 2.97% from last month’s total of $491.1 billion.

“Sales for February were positive but muted from a year earlier,” says Pat Dunwoody, vice-president of Member Services and Communications with IFIC. “Clearly, volatility was still prevalent in markets in February, which affected both the size and allocation of fund purchases this month.”

Take the reported sales of RBC Asset Management, the country’s largest fund company, out of the equation, and the industry essentially ended up with flat sales. RBC continued to dwarf competitors in sales and, according to its estimates, accounted for $1.4 billion. The company’s money market funds had net sales of $1.3 billion and long-term funds had net sales of $84 million.

While the economic environment continues to challenge investor psychology, we are encouraged to see strong overall fund sales, including net sales of long-term funds,” says Doug Coulter, president of RBC Asset Management. “In particular, investors continue to recognize the value of RBC Portfolio Solutions as an attractive long-term investment option.”

Bank competitor TD Asset Management did not fare as well. The firm finished the month in redemptions on money market funds of $146 million, and long-term net sales of $51 million for the month.

“Overall, sales of long-term funds this RRSP season were muted as investors remain anxious about the recent declines in the financial markets,” says Tim Pinnington, president of TD Mutual Funds.

Fund giant IGM Financial had mixed results. Its subsidiary Mackenzie Investments finished the month at $110 million in total net redemptions. However Investors Group moved a lot of new money, with $564.9 million in total sales, and $211 million in net sales. The Investment Planning Counsel had a mere $1.1 million in net long-term sales and a total $5 million in net sales overall.

On Monday, CI Financial — which doesn’t report to IFIC — reported retail net sales of $187 million in long-term funds and $36 million in money market funds. At the end of February, CI managed $46.6 billion in retail fund assets, a 3.4% decline from $48.2 billion in January. DundeeWealth also did relatively well, reporting net new sales of $147 million.

AGF asset management finished the month in redemption in long-term sales of $34.1 million. Total fee-earning assets under management were $32.6 billion.

Mavrix Fund Management reported net sales of $0.2 million on gross sales of $6.2 million for the month. Total AUM declined 4% month-over-month to $246.4 million; a one year decrease of 57.8% compared to February 29, 2008.

“Average monthly gross redemptions reported so far in 2009 continue to be significantly less than the monthly average reported in 2008,” said David Balsdon, CCO and secretary-treasurer. “Despite industry trends, we continue to see steady net sales in our conservative income-oriented mutual fund, the Mavrix Balanced Monthly Pay Fund.”

(03/04/09)