Canada's mutual fund industry is hoping an influx of new money in February will snap a 10-month losing streak when preliminary estimates of last month's sales are tallied later today.
But the numbers will likely still be far from the big sales figures historically seen in the month, which usually represents the bulk of the RRSP rush.
Canadians typically race to make last-minute contributions to registered retirement savings plans and -- if tradition holds -- money that made it in by the deadline of midnight last night will help push sales of mutual funds at big banks and investment dealers into positive territory for the first time since March, 2002.
Peter Loach, an analyst at BMO Nesbitt Burns Inc., forecasts that net sales will total between $200-million and $300-million for February when the Investment Funds Institute of Canada reports preliminary estimates today. If his estimate is accurate, it would represent one of the worst February sales months on record.
That's far below the $4.18-billion in net sales recorded in the same month last year, but it beats the $469-million in net redemptions that the fund industry reported in January.
(IFIC began tracking industry-wide sales in 1990. The worst February in that time was in 1995, the only time the month ever suffered net redemptions.)
Mr. Loach said companies did see the usual last-minute rush of RRSP contributions this year, but not the deluge they have seen in some previous years.
But Mr. Loach believes the industry may see stronger sales of mutual funds in March and April.
He said many people who made a contribution before the deadline in order to receive a tax receipt likely parked the money in a short-term instrument or money market fund. If so, those investors may decide to funnel that cash into mutual funds in March or April.
AIM Funds Management Inc. is likely to report the strongest sales among companies that sell through financial advisers, Mr. Loach said. Yesterday AIM, which sells funds under the AIM and Trimark banners, estimated that its sales will total $80.5-million for February.
Yesterday many companies were still tallying the figures that they will hand to IFIC, but CI Mutual Funds Inc. said it also expects to end February in the black, with net sales of $53-million.
Dan Hallett, an analyst with Sterling Mutuals Inc. in Windsor, Ont., said he believes investors are mainly focused on preserving their capital this year. As a result, people who made contributions to RRSPs had a greater interest in securities that guarantee a return.
James Gauthier, an analyst with Dundee Securities Corp. in Toronto, believes many investors are feeling apathetic after three losing years in equity markets. He also expects to see weak sales this year compared with previous RRSP seasons. "Investors are going to need to see some sort of market rebound before they're comfortable getting back in," he said.
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