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Mutual Fund News

Domestic stock funds in red again

Net redemptions of $200-million in August, IFIC reports; 15th losing month

Canadians pulled nearly $200-million from domestic stock funds in August, the Investment Fund Institute of Canada reported yesterday, extending their losing streak to 15 months and suggesting that investors are not yet convinced that a six-month rally in equity markets has staying power.
"That really is bucking the trend of what is going on in the United States, where equity fund flows have been positive since March," said James Gauthier, an analyst with Dundee Securities in Toronto.
The Canadian market's benchmark S&P/TSX composite index gained 3.5 per cent in August. The index has surged 20 per cent since March 15.
Foreign stock funds saw $179.5-million in net redemptions last month, according to final August figures released yesterday by IFIC.
A total of $6.4-billion in funds have flowed out of equity funds since June, 2002. Mr. Gauthier noted, however, that this is a tiny fraction of the Canadian fund industry's $413-billion in assets.
Sales for all types of funds in August showed a more encouraging trend, recording net inflows for the second consecutive month. Net new sales of mutual funds, excluding reinvested dividends, totalled $304-million last month, according to IFIC.
The August total was better than IFIC's preliminary net-sales estimate of $200-million, released earlier this month.
The figure was within the preliminary range provided by IFIC of nil to $400-million.
August's net sales were on pace with the net $321-million that Canadians invested in funds in July. The industry posted $100-million in net redemptions in August of last year.
Money market funds, which are usually considered short-term parking spots for cash, had $66.4-million of net withdrawals in August.
IFIC president and chief executive officer Tom Hockin said monthly money market redemptions have steadily decreased from a peak of $1.3-billion in April.
Industry assets swelled by 2.4 per cent, to $412.9-billion in August from $403.2-billion in July.
Much of the money flowing into mutual funds in August was headed for funds that invest in bonds, income trusts and dividend-paying stocks. The dividend and income category tallied $387.5-million in net sales.
"People still are searching for yield, safety and things like that," Mr. Gauthier said.

Mutual fund sales decline
Year-to-date net new sales to Aug. 31, excluding reinvested distributions, $,000

Fund type                     2003    .    2002     % change


Balanced                    $222,883   $2,084,910    -89.3%


Canadian common shares    -1,586,984      749,113   -311.8


Foreign common shares     -1,816,940    1,287,561   -241.1


Bond and income            2,492,901    1,292,963    +92.8


Foreign bond and income      216,533      170,489    +27.0


Dividend and income        2,187,369    1,944,855    +12.5


Mortgage                      21,796      -63,122   +134.5


Real estate                   59,877       55,295     +8.3


U.S. common shares           100,972    1,974,005    -94.9


Money market              -3,957,411   -2,755,439    -43.6


Foreign money market        -261,647     -302,818     13.6


All funds                -$2,320,552   $6,437,612   -136.0%

SOURCE: INVESTMENT FUNDS INSTITUTE OF CANADA

© 2007 The Globe and Mail. All rights reserved.

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