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Mutual Fund News

Net redemptions swell to $1.1-billion,

marking sixth consecutive sale month

INVESTMENT REPORTER

Investors stampeded out of Canadian mutual funds again in September as a lagging U.S. economy and fears of war in the Middle East sent stock markets plunging.

Net redemptions swelled to about $1.1-billion last month, according to preliminary numbers released yesterday by the Investment Funds Institute of Canada. That figure matches the pace of redemptions set in June and July, before the outflow slowed in August.

September marks the sixth consecutive month that the fund industry has seen more money heading out the door than coming in. That's the longest losing streak since statistics were first compiled in 1990.

The figure also contrasts with last year's September mutual fund net sales, which reached $1-billion.

"Weak equity markets continue to discourage sales," IFIC president and chief executive officer Tom Hockin said in a statement.

Analyst Peter Loach of BMO Nesbitt Burns Inc. said the shortfall is a continuation of the trend that has been building through most of this year. Investors are turning away from stock markets and putting money into assets that they perceive as offering safety, including bonds, real estate and investment trusts.

The net redemption figure could climb to $1.3-billion or fall to $900-million when final figures are tallied later this month, according to IFIC.

August also saw net redemptions, but the figure was a much smaller $100-million, as investors hoped that markets had found their footing again after July's volatility.

During September, the U.S. blue-chip index, the Dow Jones industrial average, lost 11.1 per cent to post its worst monthly loss since 1937.

The Standard & Poor's 500-stock index, which measures the broader U.S. market, also lost 11 per cent in September.

In Canada, the S&P/TSX composite index slipped 6.5 per cent during the month.

Meanwhile, bond prices continued to climb during September and housing sales across Canada set records in August.

Mr. Loach predicted that investors would need to see an end to volatility and a couple of months of solid returns in equity markets before they feel confident enough to plow cash back into stock funds.

Mutual fund industry assets fell in September to between $378-billion and $383-billion -- down about 4.8 per cent from last month's $400.3-billion.

Among the companies offering funds, many tumbled back into the red after seeing sales improve in August.

Mr. Loach said the big banks were hardest hit last month because many investors took their money from money market funds.

RBC Funds Inc. suffered the biggest blow, with net redemptions of $226-million.

TD Asset Management had net redemptions of $99-million and Scotia Securities Inc., $16-million. CIBC Securities Inc. posted net redemptions of $41-million and BMO Mutual Funds Inc., $6-million.

AGF Management Ltd. reported net redemptions of $215-million, while Investors Group Inc. suffered net redemptions of $138-million and C.I. Fund Management Inc., $124-million. AIC Ltd. had net redemptions of $66.2-million and Mackenzie Financial Corp., $46.5-million.

AIM Funds Management Inc. bucked the trend by posting net sales of $14.5-million.

© 2007 The Globe and Mail. All rights reserved.

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