As Canadian mutual fund sales continue to pick up speed, sales figures show that the big banks and popular income trust funds are reaping the biggest benefits, while marquee names of the 1990s continue to languish.
On Monday, the Investment Funds Institute of Canada estimated that net mutual fund sales for January will reach between $1.6-billion and $2-billion. Much of that money was plowed into funds that invest in bonds, income trusts and dividend-paying stocks.
January's performance extends a trend that accelerated through 2003, said Peter Loach, an analyst at BMO Nesbitt Burns Inc.: Investors are hunting for yield and turning their backs on the big Canadian and global stock funds that were the stalwarts of many portfolios in the 1990s.
A glance at 2003's 10 top-selling funds reveals that nine include the word "income" or "bond" in the name. The sole exception was the Brandes Global Equity fund, which benefited from the backing of star stock picker Charles Brandes.
The top choice among mutual fund investors was CIBC Monthly Income, which drew $732.9-million in net sales last year. That was followed by the Trimark Income Growth fund, with $630.3-million in net sales, and TD Canadian Bond fund, with $618.6-million.
Those sales helped to propel TD Asset Management to an industry-leading tally of $1.2-billion in net sales last year. Brandes Investment Partners recorded $776.1-million in net sales, CIBC Asset Management $610.6-million and Guardian Group of Funds Ltd., $577.8-million.
Meanwhile, companies that saw net redemptions for 2003 included AGF Funds Inc., Fidelity Investments Canada Ltd., CI Mutual Funds Inc., AIC Ltd., Investors Group Inc., Altamira Investment Services Inc., and Franklin Templeton Investments.
Mr. Loach said the big banks performed well because investors who typically buy guaranteed investment certificates and treasury bills at their local branch often looked at the low yields on offer and switched into income-generating funds.
He pointed to the CIBC Premium Canadian T-Bill fund, for example, which saw $652-million in net redemptions last year. Much of that money likely flowed into the CIBC Monthly Income fund, he said.
Some of the hardest-hit fund companies now were the stalwarts of the 1990s, Mr. Loach pointed out. For example, the $6.7-billion Templeton Growth Fund, which was hugely popular in the 1990s, saw $820.7-million in net redemptions last year.
The analyst said many such funds were sold in the mid-1990s with a deferred sales charge (DSC). Such schedules typically run for six or seven years, after which investors can take their money out without penalty.
Mr. Loach said that while the redemptions seem heavy, they are less significant when compared with the total assets of the Templeton Growth fund -- because the fund is so big, it simply has more investors who can take money out.
Mr. Loach said fund companies such as Mackenzie Financial Corp., Fidelity and CI are seeing the same trend with aging DSC schedules. "It means the money is less sticky."
Mr. Loach added that AGF was hurt by the departure of Mr. Brandes, who was the manager of the AGF International Value fund until he left in 2002 to set up competing funds.
Dynamic Mutual Funds reported $132.3-million in net sales last year. The company saw net redemptions of $80-million in January -- a disappointing result given the industry's overall big sales gains in the month -- but Dynamic vice-president of marketing Simon Hitzig said the downturn was a result of a non-recurring redemption by a big institution.
Mr. Hitzig said the firm's top-selling funds were the Dynamic Dividend Income fund and Dynamic Focus Plus Diversified Income Trust fund.
Mr. Hitzig said investors are returning to equity funds, but the money is trickling in slowly. "It was such a tough bear market, I think it's simply going to take time.
© 2007 The Globe and Mail. All rights reserved.
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