Shell-shocked investors pulled about $1.1-billion from mutual funds in June -- an enormous increase in the pace of redemptions and a troubling signal of what may lie ahead if stocks don't recover soon, industry watchers suggest.
The fund industry suffered its worst month since January, 1995, when it saw net outflows of $1.3-billion, according to figures released yesterday by the Investment Funds Institute of Canada (IFIC).
The June estimate for net redemptions is off sharply from $1.4-billion in net sales a year ago, and is the third consecutive month in the red for the fund business.
"It's [June] a month you'll want to forget," said mutual fund analyst Peter Loach of BMO Nesbitt Burns Inc. "Stock markets were falling and there were very few safe havens."
The S&P/TSX composite index shed 6.7 per cent in June for a year-to-date loss of 7.1 per cent. The Standard & Poor's 500 index tumbled 7.2 per cent last month for a six-month loss of 13.8 per cent. And the Nasdaq Stock Market composite index plunged 25 per cent for the first half of the year after sliding 9.4 per cent in June.
IFIC president Thomas Hockin agreed that investors are becoming too spooked to invest in mutual funds. "It appears investors' lack of confidence in the markets is the major contributing factor to the declining sales."
Mr. Loach said that "investors' confidence is getting decimated" as accounting scandals have spread recently beyond energy trader Enron Corp. to firms such as WorldCom Inc. and Xerox Corp.
Investors' confidence could be rocked further when they see double-digit losses on large, popular, core stock funds in June, the analyst added.
Most of the bank-owned fund companies had a rough ride in June as many investors also took cash from money market funds to chase slightly higher yields elsewhere in government bonds and treasury bills.
TD Asset Management Inc. suffered from net redemptions of $443-million; RBC Funds Inc. (which includes the Royal and RBC Advisor funds), $411-million.
Scotia Securities Inc. had net redemptions of $167-million and CIBC Securities Inc., $166-million. BMO Mutual Funds Inc. bucked the trend and brought in $5-million in net sales.
Many of the big brand-name fund companies were also in the red.
Fidelity Investments Canada Ltd. suffered from net redemptions of $87-million, while C.I. Fund Management Inc. had net outflows of $70-million. Investors Group Inc. posted $39-million in net redemptions, but its subsidiary, Mackenzie Financial Corp., managed to post net sales of $28-million.
AIC Ltd., which closed its deal in June to buy money manager Georgian Capital Partners Inc., had $10-million in net redemptions. And Altamira Investment Services Inc., which is being acquired by National Bank of Canada, saw net outflows of $56-million.
AGF Management Ltd. suffered from $97-million in net outflows last month, including assets in funds formerly managed by San Franciso-based Brandes Investment Partners LLP. Brandes left AGF to start its own fund company in Canada, while AGF appointed Chicago-based Harris Associates LP to replace Brandes on most of its assets.
AGF's June net outflows improved from $171-million in May. "I think those who panicked and ran to the door have done so already, and now it's slowing down," Mr. Loach said.
Among all fund companies, AIM Funds Management Inc. was the leader in June, with $200-million in net inflows. AIM's top three sellers were Trimark Income Growth, Trimark Select Growth and Trimark Fund.
Phillips Hager & North Ltd. posted net sales of $189-million; Clarington Funds Inc., $44-million; Elliott & Page Ltd., $42-million; and Northwest Mutual Funds Inc., $8-million.
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