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Fund redemptions ease in August

Markets calm investors but industry's losing streak still stretches to five months


A rebound in stock markets helped calm skittish investors and stem the flow of money out of Canadian mutual funds in August, industry observers say.

Investors pulled about $100-million from mutual funds last month, according to preliminary estimates released yesterday by the Investment Funds Institute of Canada.

That net redemption figure could swell to as much as $250-million or swing into positive territory with net sales of $50-million when final figures are tallied later this month, according to Erwin Go of IFIC.

The pace of net redemptions in August slowed considerably from the whopping $1.1-billion of net redemptions in each of June and July, according to the funds institute.

The August result is still down dramatically from last August's $1.3-billion in net sales and pushes the industry's losing streak to five months -- the longest downturn since statistics were first compiled in 1990.

North American stock markets regained some lost ground in August. By the closing bell on Aug. 30, the domestic benchmark S&P/TSX composite had advanced 7.3 per cent from its July 23 low.

The U.S. bellwether -- the Standard & Poor's 500-stock index -- climbed 14.8 per cent from its July low to its August's close.

Analyst Peter Loach at BMO Nesbitt Burns Inc. said pessimism among investors appears to be waning.

"I think the numbers -- although weak -- are encouraging," Mr. Loach said. He expects the more positive sentiment will continue in coming months.

Mr. Loach believes many investors panicked in July and pulled out after receiving their statements for the first half of the year.

"I think those July numbers were pretty extreme -- I think you could attribute that to statement shock," Mr. Loach said.

He adds that the fund industry will be reassured to see that the bulk of redemptions came from money market funds instead of stock and bond funds that were hammered in July.

Industry assets slipped to between $396-billion and $401-billion -- down approximately 0.3 per cent from last month's total of $400.5-billion, according to IFIC.

Among the companies offering funds -- including the major Canadian banks -- many saw July's outflows turn to net sales in August, while those still suffering net redemptions saw the pace of redemptions slow, according to initial estimates.

Bank-owned fund companies showed some of the most marked improvements last month, according to Mr. Loach.

TD Asset Management suffered the biggest hit from net redemptions with an outflow of $180-million. RBC Funds Inc. had net redemptions of $7-million, and BMO Mutual Funds Inc. suffered net redemptions of $28-million.

CIBC Securities Inc. posted net sales of $103-million, while Scotia Securities Inc. reported net sales of $57.7-million.

Altamira Investment Services Inc., which was recently acquired by National Bank of Canada, posted net redemptions of $46.2-million.

© 2007 The Globe and Mail. All rights reserved.

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