Fed-up Canadians pulled more than $1-billion from mutual funds in October, despite a stock market rebound that had some industry observers hoping the worst was over.
Net redemptions rose to a staggering $1.25-billion last month, according to preliminary estimates released yesterday by the Investment Funds Institute of Canada. In September, investors yanked $1.1-billion from mutual funds -- with $800-million of that figure coming from stock funds.
October marked the seventh successive month in which Canadians have taken more out of mutual funds than they put in.
Peter Loach, an analyst at BMO Nesbitt Burns Inc., believes investors were reacting to the portfolio statements they likely received detailing September's brutal performance numbers, rather than to the strong rally in U.S. stock markets that occurred in the last two weeks of the month.
Mr. Loach said many mutual fund investors do not watch the day-to-day action in stock markets, and they are probably unaware that their funds' performance may have actually improved in October.
The Dow Jones industrial average rose 10.6 per cent in October. The Standard & Poor's 500-stock index advanced about 9 per cent last month as investors held out hope for renewed economic growth in the United States.
In Canadian markets, the S&P/TSX composite index edged up a slim 1.1 per cent.
The net redemption could widen to $1.4-billion or narrow to $1.1-billion when final numbers are released later this month, IFIC said.
Despite the net redemptions, mutual fund industry assets rose in October to between $382-billion and $387-billion -- up about 1.1 per cent from September's $381.1-billion -- largely reflecting the market's rebound in the month.
James Gauthier, an analyst at Dundee Securities Corp., said there tends to be a time lag between an upturn in stock market performance and improved sentiment among average investors. He expects the selling will level off when markets stabilize for at least two or three months.
"I think we need a prolonged rebound, if not a bull market," he said.
RBC Funds Inc. recorded the biggest shortfall in October among mutual fund companies reporting results, with net redemptions of $428-million. AGF Management Ltd. reported net redemptions of $255-million and Fidelity Investments, $158-million.
Also in the losing camp were Investors Group Inc. with net redemptions of $110-million, BMO Mutual Funds Inc., $112-million, C.I. Fund Management Inc., $87-million, TD Asset Management, $88-million, and Mackenzie Financial, $56-million.
Scotia Securities Inc. had net redemptions of $52-million, CIBC Securities Inc., $44-million, Altamira Investment Services Inc., $48-million, AIC Ltd., $27-million, and Franklin Templeton Investments, $8-million.
Among fund companies in positive territory for the month, AIM Funds Management Inc. had net sales of $65-million, Phillips Hager & North Ltd., $58-million, and Brandes Investment Partners, $48-million.
Others that fought the trend with net sales included Manulife with $24-million, Dynamic Mutual Funds, $16-million, and Guardian Group of Funds Ltd., $15-million.
© 2007 The Globe and Mail. All rights reserved.
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