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Mutual Fund News

Investors flee mutual funds

Industry's losing streak now at 10 months

INVESTMENT REPORTER

The 2003 RRSP season got off to a rocky start in January as Canadians pulled $760-million from mutual funds, according to estimates released yesterday by the Investment Funds Institute of Canada.

"Economic, political and market uncertainty continues to leave investors on the sidelines," Tom Hockin, IFIC's president and chief executive officer, said in a statement.

IFIC said net redemptions for January could range from $600-million to as much as $900-million when final numbers are released later this month.

The group also estimates that net assets of the industry at the end of January will be in the range of $379-billion to $384-billion -- down approximately 2.5 per cent from the previous month's tally of $391.3-billion.

That compares with a stellar first month of 2002, when sales reached $2.5-billion.

The industry's losing streak now stands at 10 months. The latest numbers are bad news for mutual fund companies hoping that the trend would change in time for the key registered retirement savings plan season.

Peter Loach, an analyst at BMO Nesbitt Burns Inc., said many mutual fund holders appear to be reacting to the statements they receive from their funds in the mail each month. With so many categories in negative territory, investors are having trouble finding a place to put their cash.

"There aren't too many places to hide right now," he said.

Some investors may have been taking heed of a stock market adage that holds that, as January goes, so goes the year.

The U.S. benchmark Standard & Poor's 500-stock index dipped 3 per cent last month. In Canada, the Toronto Stock Exchange's S&P/TSX composite index slipped nearly 1 per cent in January.

"We're talking about difficult markets and investors are acting accordingly," Mr. Loach said.

He adds that investors may be unsettled by the prospect of a U.S.-led war with Iraq. War equals uncertainty, Mr. Loach says.

"Are you going to put fresh cash into a market that's uncertain when you've been beaten up for two years in a row?"

January's sales tend to be uneven, Mr. Loach says. The month marks the traditional kickoff to RRSP season, but many investors delay making their contributions until late February or early March.

In December, investors gave the mutual fund industry some hope that the blood-letting was slowing from prior months as redemptions declined to $238.2-million. Stock markets also stabilized during the month.

Among mutual fund companies reporting preliminary January results to IFIC, AGF Management Ltd. was hit by net redemptions of $239-million, RBC Funds Inc. reported net redemptions of $114-million, and Fidelity Investments $175-million.

Other companies losing ground were Franklin Templeton Investments with net redemptions of $128-million, AIC Ltd. with $87-million, National Bank Mutual Funds with $85-million and Mackenzie Financial Corp. with $84-million. Altamira Investment Services Inc. reported net outflows of $70-million, Investors Group Inc. $62-million and CI Mutual Funds $60-million.

Among companies reporting net sales for the month were CIBC Securities Inc. with $182-million, Brandes Investment Partners with $100-million and TD Asset Management with $43-million.

Also in the black were Manulife Mutual Funds with sales of $29-million, Phillips Hager & North Ltd. with $27-million, Guardian Group of Funds Ltd. with $26-million and AIM Funds Management Inc. with $17-million.

© 2007 The Globe and Mail. All rights reserved.

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