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Investors dump mutual funds

Impressive stock market rally does little to slow the pace of net redemptions

INVESTMENT REPORTER

Canadians continued to pull money out of their mutual funds last month, as November's impressive stock market rally merely slowed investors' headlong rush for the exits.

Net redemptions totalled $700-million, according to preliminary estimates released yesterday by the Investment Funds Institute of Canada (IFIC). The loss extends the mutual fund industry's losing streak to eight months.

The November shortfall contrasts sharply with the same month last year, when the industry tallied net sales of $3.5-billion.

Still, the numbers were better than in October, when investors withdrew $1.1-billion from mutual funds, with nearly $700-million of that coming from stock funds.

The total net redemptions for November could widen to $900-million or narrow to $500-million when final numbers are released later this month, IFIC said.

Peter Loach, an analyst at BMO Nesbitt Burns Inc., said the rebound in equity markets during October and November likely has investors feeling more optimistic.

The S&P/TSX composite index gained 5.1 per cent in November. In the United States, the Standard & Poor's 500-stock index advanced 5.7 per cent, while the blue-chip Dow Jones industrial average rose 5.9 per cent. Bullishness about technology shares propelled the Nasdaq Stock Market to an 11.2-per-cent jump, as investors seemed to develop an appetite for risk again.

By the end of November, the Dow had tallied eight consecutive positive weeks and the TSX four.

"I think investors are starting to gain a little more confidence in the market," Mr. Loach said.

He added that mutual fund investors probably had a pleasant surprise a few days into November, when they received their statements showing October's performance. The fall rebound followed months of turmoil and deep losses in markets.

Meanwhile, after several months of heavy redemptions, most mutual fund investors inclined to pull out of the market had likely already done so.

"Net new sales for November increased by approximately $400-million from the previous month," Tom Hockin, IFIC's president and chief executive officer, said in a statement. "There was also a strong growth of assets in the industry of approximately 3.1 per cent."

Most fund companies saw some improvement in November from October's dismal results, Mr. Loach said.

Among mutual fund companies reporting to IFIC, RBC Funds Inc. had net redemptions of $378-million, AGF Management Ltd. had net redemptions of $212-million and Investors Group Inc., $190-million.

Other companies losing ground were Fidelity Investments with net redemptions of $87-million, Scotia Securities Inc. with $72-million and Franklin Templeton Investments with $55-million. CIBC Securities Inc. reported an outflow of $33-million, Altamira Investment Services Inc. $23-million and Mackenzie Financial $19-million.

Among companies reporting net sales for the month were C.I. Mutual Funds with $241-million, AIM Funds Management Inc. with $125-million and Phillips Hager & North Ltd. with $88-million.

Also in the black were Brandes Investment Partners with net sales of $59-million, Guardian Group of Funds Ltd. with $28-million and BMO Mutual Funds Inc. with $7-million.

© 2007 The Globe and Mail. All rights reserved.

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