Investors continued to unload mutual funds in December, extending the industry's losing streak for the ninth consecutive month and providing a fitting end to what has been a terrible year for mutual fund investors.
Redemptions fell dramatically in December to $200-million from $579.8-million in November, according to preliminary numbers provided by the Investment Funds Institute of Canada (IFIC).
In October, investors withdrew $1.1-billion from mutual funds, with nearly $700-million of that coming from stock funds.
Despite the level of redemptions, net sales for 2002 are expected to be $3.4-billion, compared with the previous low of $5.2-billion in 1995, said an IFIC spokesman. IFIC has been keeping such records since 1990.
Sales reach their peak levels in the first three months of each year during the selling season for registered retirement savings plans.
IFIC said that, based on a sample of the preliminary data from its members, the net new monthly sales for December could range from an outflow of $400-million down to no change at all when final numbers are released later this month.
Total assets under management by the mutual funds industry is estimated to be between $389- billion and $394-billion, down 1.5 per cent from November's total of $397.8-billion, IFIC said.
Most of the money is being taken out of the money market, short-term-bond and mortgage funds, said Peter Loach, an analyst with BMO Nesbitt Burns Inc.
It is the fourth consecutive month that investors have been cashing in long-term assets held in equity funds, Mr. Loach said. However, the rate of redemptions in those sectors "is really not extreme," he said.
Investors are seeking safety in cash and near-cash investments. Money market funds account for about 15 per cent of the total mutual fund assets, Mr. Loach said. In the late 1990s, money market funds accounted for between 9 and 12 per cent of total assets and for much of the 1990s it was in the single digits, he said.
The relatively high level of money in money market funds also comes at a time when interest rates are low, he said.
Mutual funds that invest in real estate investment trusts and bonds have attracted much of the new money coming into the industry, Mr. Loach said. "Investors are looking for income and safety," he said.
As stock markets strengthen it is expected that money will flow back to growth funds and global equity funds, he said.
Funds managed by the banks experience the greatest level of redemptions in their money market funds, Mr. Loach said.
RBC Funds Inc. said yesterday that its mutual fund net redemptions totalled $119-million in December. For the year, the RBC group of funds had net redemptions of $903-million, which includes $1.35-billion being taken out of money market funds, which were offset by net sales of long-term investments of $444-million.
RBC Funds, an arm of the Royal Bank of Canada, is Canada's second-largest fund company with assets under management of $34-billion.
Other fund groups showing net redemptions in December were Investors Group Inc., $139-million; Fidelity Group, $101-million; and AGF Management Ltd., $109-million.
The largest sales increase was by Phillips Hager & North Ltd., which saw its net sales in December increase by $231-million.
Mackenzie Financial Corp. reported net sales for December of $100.7-million. Its assets under administration totalled $30.7-billion at year-end.
Brandes Investment Partners LP had a net sales increase of $58-million. It has net assets of $398-million under management.
© 2007 The Globe and Mail. All rights reserved.
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