Mutual funds limp into RRSP season

Mutual-fund redemption momentum eased in January, but not enough for sales to turn positive for the start of RRSP season, according to the Investment Funds Institute of Canada (IFIC).

In January, overall mutual fund net redemptions came in at $699 million, down sharply from $5.1 billion in December.

While balanced fund redemptions remained largely unchanged at $4.5 billion last month, equity fund redemptions dropped to $1.1 billion in January from $2.3 billion in December, the data showed.

Meanwhile, bond fund sales surged to $3.7 billion in January, up from $817 million in the previous month. Specialty fund sales climbed too.

Nonetheless, long-term funds remained in net redemption territory, with $1.2 billion worth in January. Money-market fund sales declined to $487 million from $790 million during the month.

Despite ongoing redemption activity, mutual fund assets under management (AUM) rose by $15.6 billion in January thanks to market gains.

Total AUM now sits at $1.96 trillion, up by 0.8% in the month, IFIC said.

At the same time, ETF sales largely held up in January.

Total net sales came in just shy of $3.2 billion, down from almost $3.8 billion the previous month. However, the asset mix shifted significantly.

Net sales of equities ETFs jumped to almost $2.4 billion in January from just under $1.8 billion in December.

This rise was more than offset by a drop in bond ETF sales, which fell to just $321 million from more than $1.8 billion. Specialty fund sales turned negative, with $345 million pulled in January compared to $219 million in net sales for December.

According to IFIC, the specialty funds’ outflows were primarily driven by net redemptions from bitcoin ETFs. In early January, the U.S. Securities and Exchange Commission finally approved spot bitcoin ETFs in the U.S. market — a development that initially attracted large inflows to these funds.

While net sales of long-term ETFs fell from over $4.0 billion in December to under $2.8 billion in January, the drop was cushioned a bit by money-market ETFs, which saw $401 million in net sales last month, up from $271 million worth of redemptions in December.

Total ETF assets rose by 1.4% in January, an increase of $5.4 billion to $388.3 billion by the end of the month, IFIC noted.

Both mutual fund and ETF assets grew for the third straight month in January. Over that period, ETF assets are up by 12.4%, and mutual fund assets have grown by 8%, IFIC reported.