Sales of mutual funds plunged in March as Canadians shunned low-rate money market funds for higher-yielding alternative investments.
Preliminary estimates by the Investment Funds Institute of Canada indicate that net sales sank to between $2-billion and $2.4-billion last month from $4-billion for the same period a year ago.
"Money market funds have always been the swing factor," financial services consultant Dan Richards of Strategic Imperatives said yesterday.
"Interest rates of money market funds have dropped to a level where people are saying 'why bother?' "
Mr. Richards says the drop in fund sales could be attributed to cash shifting away from money market funds into alternative higher-income-oriented investments ranging from corporate bonds to income trusts.
The flight from money markets was evident among flows at bank fund companies. TD Asset Management Inc. posted net redemptions of $100-million in March.
TD spokeswoman Patricia Lovett-Reid said TD was counselling investors to shift cash into a higher-yielding savings account instead of its money market funds. The average money market fund yielded 0.1 per cent in February.
Other bank fund companies suffering from net outflows included Scotia Securities Inc., $118-million, and CIBC Securities Inc., $1-million.
But RBC Funds Inc. (which includes the Royal and RBC Advisor funds, took in $143-million in net sales; BMO Mutual Funds Inc., $30-million, and HSBC Asset Management Ltd., $7.4-million.
Among all fund companies, AIM Funds Management Inc. was the leader with $476.6-million in net sales. Dwayne Dreger, AIM's vice-president of communications, said AIM's March sales surpassed the $432-million for the first quarter of 2001. Most of the cash went into the value-oriented Trimark fund offerings.
Last month, AGF Management Ltd. posted net sales of $244-million; Fidelity Investments Canada Ltd., $239-million; Mackenzie Financial Corp., $197-million, and its parent Investors Group Inc., $196-million; ClaringtonFunds Inc., $166-million; AIC Ltd., $105-million and C.I. Fund Management Inc., $105-million.
Companies that saw net outflows included Altamira Investment Services Inc., $43.4-million, and StrategicNova Mutual Funds Inc., $32-million.
© 2007 The Globe and Mail. All rights reserved.
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