Canadian mutual fund redemptions fell dramatically in December, declining 59 per cent to $238.2-million from $341-million a month earlier, the industry says.
As a result of weak stock markets, the Canadian mutual fund industry's assets fell 8.2 per cent or $35.1-billion from a year ago to $391.3-billion, the first year-over-year decline in 13 years, the Investment Funds Institute of Canada said yesterday.
The final year-end results mark the ninth consecutive month of redemptions. In its preliminary statistics released earlier this month, IFIC estimated December's redemptions at about $200-million, although it said the final figure would be anywhere from zero to $400-million.
Net new sales for 2002 for all funds totalled $3.36-billion, down 88.3 per cent from $28.63-billion in 2001, according to IFIC. The previously low level of net sales was $5.2-billion in 1995. IFIC has been keeping statistics since 1990.
Sales peak during the first three months of each year during the selling season for registered retirement savings plans.
"It appears Canadian investors remain very risk averse," said George Vasic, a funds analyst with UBS Warburg Inc. "They are selling equities and still buying bonds. This does not augur well for the upcoming RRSP selling season."
Canadian equity funds saw their seventh consecutive outflow in December, bringing the total outflow to $1.4-billion since the end of May or 1.4 per cent of assets, UBS Warburg said.
In contrast with their U.S. counterparts, Canadian investors also appear more safety conscious, Mr. Vasic said. U.S. investors stopped selling equity funds in October, and during November and December fund sales equalled fund redemptions, he said.
During the past four months, Canadian investors have begun selling foreign funds more heavily after previously selling domestic equity funds more aggressively, Mr. Vasic said. "We believe risk aversion remains firmly in place, as bond funds recorded their largest inflow since the last RRSP selling season."
"It looks like things may be turning the corner," said James Gauthier, a fund analyst with Dundee Securities Corp. The level of redemption is the lowest it has been since May and stock markets have stabilized, he said.
Much of the cash is being pulled out of the money market funds where interest rates have declined, Mr. Gauthier said. Most of the investors who plan to take money out have probably already done so, he said.
Analysts say there is still a lot of cash on the sidelines.
About $60.4-billion is held in Canadian and foreign money market funds, which is 26.4 per cent of the total amount investors hold in Canadian equity and bond funds, UBS Warburg said.
The top five mutual funds groups in Canada by size were Investors Group ($37.6-billion); RBC Funds Inc. ($34.1-billion); AIM Funds Management (33.9-billion); Mackenzie Financial Corp. ($30.7-billion); and TD Asset Management (28.8-billion).
Yearly sales plummet
Net new sales excluding reinvested distributions, $'000
Fund type 2002 2001 % change Balanced $1,862,965 $1,930,382 -3.5% Canadian common shares 67,756 1,622,758 -95.8 Foreign common shares 112,685 2,742,594 -95.9 Bond and income 1,873,386 1,452,630 +29.0 Foreign bond and income 114,598 -45,484 +362.0 Dividend and income 2,371,060 1,368,634 +73.2 Mortgage -105,272 -72,370 -45.5 Real estate 87,807 15,368 +471.4 U.S. common shares 1,866,723 2,518,786 -25.9 Money market -4,451,331 15,698,869 -128.4 Foreign money market 436,505 1,397,890 -131.2 All funds $3,363,872 $28,630,057 -88.3
SOURCE: INVESTMENT FUNDS INSTITUTE OF CANADA
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