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Mutual Fund News


Rebound strongly from last year's showing when investors pulled out $107-million

The mutual fund industry raked in a net $4.1-billion in sales in March to report their best numbers for that month since 2000 as sales rebounded strongly from last year's dismal showing when investors pulled a net $107-million from funds in March.

Breaking the numbers down further, Canadians continued to chase investments that churn out income last month as they plowed a net $922-million into dividend and income mutual funds.

Another $971.7-million went into bond and income funds, according to March sales figures released yesterday by the Investment Funds Institute of Canada (IFIC), an industry group.

The net sales match the estimate reported by IFIC earlier this month.

By contrast, mutual fund investors directed a paltry $211-million into Canadian stock funds in the month that traditionally wraps up the season for contributions to registered retirement savings plans.

The numbers show an overwhelming preference for securities that many retail investors perceive as being a safer investment than common stocks.

The trend suggests that Canadians are still cautious towards equity markets, says analyst James Gauthier of Dundee Securities Corp.

Mr. Gauthier says that hesitancy is somewhat surprising because one-year performance numbers across many categories have been stellar, with some equity funds posting gains of 40 and 50 per cent.

"Investors being the performance chasers they are, I would have thought a lot of people would have jumped on the bandwagon and become more interested in equities," he said.

The light flow into Canadian stock funds shows a backslide from February, when mutual fund investors poured a net $554-million into that group.

Last year in March, Canadian common share funds saw $185-million in net redemptions.

George Vasic, strategist and chief economist at UBS Securities Canada Inc., notes that Canadian and foreign equity funds, which typically see about 60 per cent of their annual purchases in the first quarter, took in a total of $835-million and $1.2-billion, respectively, this RRSP season. That's ahead of last year, but only the ninth best of the past 12 years.

Meanwhile, Mr. Vasic points out, income-oriented funds received a net $8.5-billion in the first three months of the year to mark their third-best RRSP season of the past 12.

IFIC president and chief executive officer Tom Hockin said sales for the first three months of the year totalled $10.9-billion, with long-term funds making up over 96 per cent of the sales.

March often sees strong sales because the deadline for RRSP contributions falls within the first few days of that month.

In stock markets last month, the S&P/TSX composite index edged down 2.3 per cent, the Dow Jones industrial average slipped 2.1 per cent and the Nasdaq composite index declined 1.8 per cent.

Mr. Gauthier says the total net sales are a good sign.

"The state of the industry is still relatively healthy," Mr. Gauthier said of the most recent results.

Mutual fund sales jump

Year-to-date net new sales to March 31, excluding reinvested distributions, $'000

Fund type; 2004; 2003; %change

Balanced; $2,302,276; $213,251; +979.6%

Canadian common shares; 834,470; -574,380; +245.3

Foreign common shares; 637,579; -727,615; +187.6

Bond and income; 2,837,766; 1,070,852; +165.0

Foreign bond and income; 205,353; 45,510; +351.2

Dividend and income; 2,852,936; 643,104; +343.6

Mortgage; 231,473; -5,335; +4,438.8

Real estate; 22,847; 43,475; -47.4

U.S. common shares; 590,100; 73,887; +698.7

Money market; 519,825; -861,444; +160.3

Foreign money market; -118,772; -11,713; -914.0

All funds; $10,915,853; -$90,408; +12,174.0%

© 2007 The Globe and Mail. All rights reserved.

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