Investors flee rising stock markets in October

Demonstrating a long-standing preference for making the wrong investment decisions, Canadian mutual fund investors continued to flee risk assets in October, despite a steady recovery in equity markets throughout the month.

The S&P/TSX Composite Index climbed from under 11,100 at the start of the month, to just over 12,250 by Hallowe’en. While that sounds like a treat, it was definitely a trick on mutual fund investors.

According the latest statistics from IFIC, equity funds posted net redemptions of $1.52 billion, nearly matching September’s $1.61 billion sell-off. In the first 10 months of the year, investors unloaded a net total of $7.54 billion from their equity funds

Bond funds were the clear beneficiaries of the stock sell-off, with net sales totaling $1.5 billion, up from $1.04 billion September, 2011. Year-to-date, bond funds have attracted $5.66 billion in net sales, down from $9.29 billion for the same period last year.

Balanced funds pulled in $566.9 million in net sales, up from $485.1 million in September. So far this year, balanced funds have enjoyed net sales of $25.6 billion, beating last year’s $22.5 billion for the same period.

Overall, the mutual fund industry posted net sales of $282.5 million, as the $637.8 million in positive net flows into long-term funds was partially offset by a $355.3 million net withdrawal from money market funds.

Assets under management ended the month at $773.7 billion, up $25.1 billion or 3.4%, year-to-date.

Funds of funds remained popular, with net inflows of $679.4 million, although that total is down from $839.8 million in September.

Standalone fund sales were net negative at $396.8 million, but that represents a substantial recovery from September’s $1.045 billion sell-off.

Year-to-date, funds-of-funds are the clear winners, with over $17 billion in net sales, compared to just $2.6 billion among standalone funds. Funds-of-funds now account for $165.7 billion in AUM, still far behind the $608 billion held in standalone funds.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.