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Mutual Fund News

Choppy spring returns cool fund sector

April sales down 60 per cent from last year as anxious investors unload equity assets


Mutual fund sales in April slipped to $567-million, down about 60 per cent from last year, as investors chose to sit on the sidelines of the directionless market, the Investment Funds Institute of Canada reported yesterday.

April's performance was "so-so," said George Vasic, analyst and chief economist at UBS Securities Canada Inc., in a report yesterday. One year ago, the industry wracked up April net sales of $1.4-billion and the month's net sales from 1994 to 2004 averaged about $1-billion, he said.

But April can be a fickle sales month for the fund business as many investors take a breather following the end of registered retirement savings plan (RRSP) season. For example, the sector saw April redemptions of $1.6-billion in 2003 and redemptions of $263-million in April, 2002.

Tom Hockin, IFIC's president and chief executive officer, was upbeat, noting investors have purchased $10.1-billion in mutual funds so far this year.

April "marks the sixth straight month of positive sales for our industry, pointing yet again, to the ongoing confidence Canadians have in our funds," he said in a statement.

Raynor Burke, head of fund research at National Bank Financial Inc., said strong winter markets followed by choppy returns through the spring have left investors wary and a little anxious, he said.

"People are interested in staying in the market," Mr. Burke said. "But a lot of people are holding cash and waiting . . . there's a lot of initiative in the market to follow what may be the next hot sector."

Long-term sales trends continued last month with investors buying conservative, yield-generating funds and shunning equity and foreign equity funds.

Net sales were strongest in dividend and income funds, at $699-million, followed closely by balanced funds at $688-million. Canadian common stock funds were out of favour, reporting total net redemptions of about $359-million. U.S. and foreign common stock funds reported net redemptions of $514-million.

April was a weak month for equity markets -- the S&P 500 index dropped 2 per cent while the S&P/TSX composite slipped 2.5 per cent -- and the fund industry's assets slipped. Total assets under management in April fell to $511.5-billion, down from $513.3-billion in March.

Selective Asset Management Inc., a Toronto alternative asset manager, expects weak equity markets to continue through the summer of 2006. Investors will continue to focus on cash flow and earnings growth, conditions that mean "a warm reception" for conservative balanced and income-generating products, said Robert McWhirter, president and portfolio manager at Selective.

"If they [investors] are conservative now, we think that conservatism will be warranted looking out over the next 12 months, Mr. McWhirter said.

Mutual fund sales slip

Year-to-date net new sales to April 30, excluding reinvested distributions, $'000

Balanced$4,318,382 $2,757,879 56.6%
Canadian common shares - 390,846672,633 - 158.1
Foreign common shares - 1,237,669556,835 - 322.3
Bond and income2,851,3303,431,664 - 16.9
Foreign bond and income327,062249,50431.1
Dividend and income4,887,4783,328,48046.8
Mortgage135,332289,305 - 53.2
Real estate48,02520,583133.3
U.S. common shares - 470,110626,868 - 175.0
Money market - 438,164539,524 - 181.2
Foreign money market - 44,761 - 176,88174.7
All funds$9,986,059 $12,296,394 - 18.8%


© 2007 The Globe and Mail. All rights reserved.

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