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Mutual Fund News

Fund sales soar to $5-billion

Net inflows explode as stock runup, low rates on savings vehicles plump numbers

Canada's mutual fund industry tallied an explosive $5-billion in net sales last month, as a lengthy runup in stock markets and rock-bottom rates on savings vehicles sent investors rushing back into funds, preliminary estimates suggest.

Fund sales surged more than 900 per cent to between $4.8-billion and $5.2-billion last month from $485.2-million in February of last year, according to preliminary tallies from the Investment Funds Institute of Canada (IFIC), the industry trade group.

February's performance marks the best showing for mutual fund sales since February of 2000 at the height of the technology stock bubble. The numbers cheered industry players who struggled through a grim streak of weak sales and net redemptions that continued nearly unbroken for two years.

"It looks like the mutual fund industry certainly has come full circle here," said Peter Loach, an analyst at BMO Nesbitt Burns Inc.

Mr. Loach said Canadians poured money into banks and brokerages over the final weekend of registered retirement savings plan season to provide a strong finish for February.

Last month's total also represents a 178-per-cent jump from the $1.8-billion recorded in January.

In Toronto, the S&P/TSX composite index rose about 3.1 per cent in February. The advance marked the TSX's fifth consecutive monthly gain and the 10th gain in the past 11 months.

In the United States, the Dow Jones industrial average of blue chips edged up 0.91 per cent last month, while the benchmark Standard and Poor's 500-stock index added 1.2 per cent. The Nasdaq composite index edged down 1.2 per cent last month.

Mr. Loach said investors likely looked at their rising portfolio statements and the paltry interest rates on guaranteed investment certificates and decided to plow more money into equity funds. Those seeking safety and yield likely put their money toward income and dividend funds, he added.

"The 30,000-foot view is tax-sheltered growth of capital," he said.

Mr. Loach notes that mutual funds across virtually every category have posted strong performances in the past year.

The analyst expects March will also see net sales of funds as investor confidence rises.

The majority of February's sales likely went into long-term funds, said IFIC president and chief executive officer Tom Hockin.

"This indicates that investors are not just trying to benefit from tax savings during this RRSP season, but that they are investing for the long term," he said in a statement.

IFIC estimated that net assets of the industry at the end of February will be in the range of $463-billion to $468-billion, up approximately 3.2 per cent from last month's total of $451.6-billion.

The big banks led sales of funds in February. RBC Asset Management Inc. posted net sales of $969-million, TD Asset Management Inc. had net sales of $583-million, and BMO Funds, $538-million. CIBC Asset Management Inc. posted net sales of $402-million and Scotia Securities Inc., $138-million.

© 2007 The Globe and Mail. All rights reserved.

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