Turbulent stock markets and portents of war have dealt the Canadian mutual fund industry its worst RRSP season in eight years, according to preliminary estimates.
The Investment Funds Institute of Canada said yesterday that net sales for February are likely to come in at $250-million -- about 94 per cent below last year's sales of $4.18-billion in the same month.
IFIC president Tom Hockin said the final net sales figure could range from $100-million to $400-million when all the numbers are tallied this month.
But many mutual fund companies will be relieved to see even slim net sales, after the industry's unprecedented 10-month streak of net redemptions and a slow start to the key season for contributing to registered retirement savings plans had many observers fearing February could also end in the red.
Including January's net redemptions of $469-million, the first two months of 2003 marked the fund industry's most dismal RRSP season since 1995, when mutual funds suffered net redemptions in January and February.
February's sales also count as the second-worst for that month since IFIC began keeping such statistics in 1991.
Banks and mutual fund companies found investors hesitant to commit new money to their RRSPs this year, after last year's corporate accounting scandals and three years of falling equity markets.
AIM Funds Management Inc. reported the strongest sales among companies that sell through financial advisers. AIM president and chief executive officer Philip Taylor said the company's sales of $81-million in February bring net inflows to $150-million for the year to date.
Mr. Taylor believes investors are still rattled by the turmoil in stock markets and wary of terrorism and potential war.
"I think if you'd sneezed, you would have missed the RRSP season this year."
Mr. Hockin pointed out that the deadline for making a contribution in order to receive a tax receipt for the 2002 tax year was March 3, which means the final days of the RRSP selling season were not included in February's numbers. He added that history shows investors often funnel cash into short-term money market funds in order to receive the receipt for a tax deduction, then sit down with their advisers later in the spring to decide how to invest the money.
Last year, for example, Canadians pulled $811-million from money market funds in April, but all categories of long-term stock and bond funds had net sales that month.
IFIC estimated that net assets at the end of February were in the range of $372-billion to $377-billion -- down about 1.7 per cent from January's total of $381.6-billion.
Among all of the companies that report to IFIC, TD Asset Management posted the largest net sales in February, with $220-million. BMO Funds had sales of $79-million and Manulife Mutual Funds $70-million.
CIBC Asset Management Funds reported net sales of $59-million, C.I. Mutual Funds $53-million, and Phillips Hager & North Ltd. $46-million.
Those reporting net redemptions included Fidelity Investments, with $178-million of outflows; Franklin Templeton Investments, with $136-million; and AGF Management Ltd., with $119-million.
© 2007 The Globe and Mail. All rights reserved.
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