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Big Five banks dominate sales in peak RRSP season

But estimated total $9.5-billion in sales falls below $10.9-billion of a year ago

MUTUAL FUNDS REPORTER

Canada's five biggest banks dominated registered retirement savings plan season in 2005, gobbling up more than half of the mutual fund industry's estimated $9.5-billion in net sales during the first three months of this year.

The banks' commanding position in the sector was detailed yesterday when the Investment Funds Institute of Canada released its March sales estimates. Royal Bank of Canada was this RRSP season's big winner, with its mutual fund unit racking up about $2-billion in new business since January. The fund arms of Toronto-Dominion Bank and the Bank of Montreal each reported more than $1-billion in net sales over the last three months.

"You've got to be as big as the banks to compete," said Bill Holland, president and chief executive officer of CI Fund Management Inc. Through a series of acquisitions, the Toronto fund company now manages about $44.8-billion, a size that rivals the biggest fund operations of the banks themselves.

According to IFIC, March's net sales are expected to be between $3.3-billion and $3.7-billion, down about 15 per cent from $4.1-billion reported in March last year. The estimated $9.5-billion total sales for the key RRSP season falls about 13 per cent below the 2004 total of $10.9-billion.

Nevertheless, Tom Hockin, IFIC's president and CEO, said the results indicate the fund industry's growth is stable. In an interview, Mr. Hockin said Canada's strong resource and financial sectors, coupled with a buoyant currency, will mean a continued healthy investment climate.

"I think we are going to have very good markets . . . the question is how much of it will be captured by mutual funds," Mr. Hockin said.

Despite the bank's strong showing, a handful of smaller niche-oriented fund companies benefited from what industry observers described as the "flight to quality." For example, Saxon Group of Funds reported March sales of $40-million and total RRSP season sales of $161-million. The Toronto company's conservative fund management style has won good industry reviews and 50 consecutive months of net sales. "It's all about delivering more 'up' and less 'down', " said Shaun Little, Saxon's vice-president of marketing.

Meanwhile, investors continued to shun AGF Management Ltd., AIC Ltd., Fidelity Investments Canada Ltd. and lastly, Altamira Investment Services Inc. The four firms reported net redemptions last month and are restructuring operations to improve sales.

While fund sales surged in March, it was a poor month for performance. According to Morningstar Canada, all but three of 32 fund asset classes fell in value in March.

While the bulk of Canadian equity and bond funds dipped slightly into negative territory, foreign equity funds were hurt by the strong Canadian dollar. Meanwhile, a rise in U.S. interest rates had disastrous implications for volatile emerging market funds, said Morningstar analyst Brian O'Neill.

"Often when there are increased inflation worries . . . that can trickle down to emerging markets and cause a selloff in those regions," Mr. O'Neill said.

The three Morningstar Canada fund indexes that made it into the black last month barely broke even. The real estate fund index eked out a 0.09-per-cent gain, followed by Canadian money market at 0.04 per cent and U.S. money market with 0.01 per cent.

Big appetites

Canada's five biggest banks gobbled up more than half of the mutual fund industry's estimated $9.5-billion in net sales during the first three months of this year.

The winners

Fund companyMarch net sales ($million)Sales Jan.-March ($billion)Total assets under management ($billion)
1. RBC Asset Management$577$2.1$49.8
2. Manulife Investments*$188$1.4$6.3
3. TD Asset Management$477$1.2$37.8
4. BMO Funds^$213$1.1$20.9

*Manulife's figures include gain of $884-million in assets under management from the acquisition of Maritime Life

^BMO Funds include the results of Guardian Group of Funds Ltd.

The losers

March redemptions ($million)Redemptions Jan.-March ($million)Total assets under management ($billion)
1. AGF Management*$190^$1,400$22.5
2. A.I.C. Ltd.$310$1,000$9.9
3. Fidelity Investments$41$337$31.6
4. Altamira Investment Services$73$198$3.7

*AGF's figures include the loss of $884-million in assets under management from former client Maritime Life

^estimate

SOURCE: GLOBEFUND.COM

© 2007 The Globe and Mail. All rights reserved.

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