Safe-haven investing in income, dividend and balanced funds continue to dominate the mutual fund landscape, October industry sales figures show.
Dividend and income funds -- a broad category that includes high-yield blue-chip funds and income trust funds -- reported $703.4-million in net new sales last month, the Investment Fund Institute of Canada reported yesterday. That's almost double the $382.8-million sunk into balanced funds, the second-best sales category.
"Canadians are a bit more conservative . . . people are looking more at yield than they are at equity gains," Tom Hockin, IFIC's president and chief executive officer, said in an interview. Many mutual fund investors are edging closer to retirement and looking to conservative, high-yield funds to support their lifestyle, he said.
Investors continue to steer clear of equity funds -- $520.7-million was pulled from foreign common share funds, $334.4-million was yanked out of Canadian common share funds and $156.4-million left the U.S. common share pool.
Poor interest in equity funds is the result of lacklustre stock markets and a strong Canadian dollar, said Bill Holland, president and chief executive officer of CI Fund Management Inc. The Canadian dollar's rise from 62 cents (U.S.) in January last year to about 83 cents today has wiped out gains posted by foreign equity funds and Canadian funds that hold up to 30 per cent in foreign assets, he said.
"Our investors have missed out on the recovery [of some U.S. equity funds]," Mr. Holland said.
The exodus from common stock funds resulted in the second consecutive month that fund sales have dipped into negative territory. Investors pulled $52-million from Canadian funds last month, an improvement on net redemptions of $545-million in September.
October fund sales are traditionally erratic and hard to predict as poor summer sales end and fund companies gear up for RRSP season in January and February. In October, 2003, IFIC reported net new sales of $455-million and net redemptions of $1.1-billion in October, 2002.
Four fund companies accounted for the bulk of net redemptions. Combined, AGF Management Ltd., AIC Ltd., CIBC Asset Management and Fidelity Investments reported $889.5-million in lost sales. Lengthy deferred sales charges (DSC) are coming to an end and unitholders are looking for a better return, said Peter Loach, an analyst at BMO Nesbitt Burns.
"It's the same old broken record story," he said. "Large fund firms with a large percentage of their funds being sold on DSC are now off the schedule and are therefore very non-sticky."
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