Mutual fund sales are expected to reach $1.75-billion in June, an explosive performance for a month that typically is a prelude to the sleepy summer sales season.
The net sales estimate from the Investment Funds Institute of Canada outpaced June of last year by a stunning 250 per cent, when the sector reported $491-million in fund sales. It also exceeds May's better-than-expected sales performance of $1.1-billion. If IFIC's sales estimate holds, last month will be the best June on record since 1998, when fund companies racked up $1.9-billion in sales.
"We're seeing a lot more confidence from investors," said BMO Nesbitt Burns Inc. analyst Peter Loach. "People say 'Ah, mutual funds, they are in decline.' This is not an industry in decline. This is almost $2-billion net new sales."
The strong sales networks of the Big Six banks dominated the market, snapping up about $1.2-billion in net sales in June. Scotia Securities Inc., fund arm of Bank of Nova Scotia, was laggard of the group, with $17-million in redemptions.
Another four major fund companies are expected to report disappointing June results: AIC Ltd., with a loss of $380-million in business; AGF Management Ltd., with an estimated $150-million in redemptions; Altamira Investment Services Inc., down an estimated $43-million and Fidelity Investments Canada Ltd., off $614-million.
IFIC's figures tell only part of the story for three of the four firms. Toronto-based Altamira's High-Interest Cash-Performer money market product continues to garner interest, getting most of $260.4-million in net sales not counted by IFIC.
Meanwhile, redemptions at AGF and Fidelity are in decline, and gross sales are improving after the two companies restructured operations, cut fees and introduced new funds. About two-thirds of Fidelity's redemption hit is the result of the loss of business from a unit of Clarica Life Insurance Co. In 2002, Sun Life Financial Inc. bought the insurance company, and much of the management of Clarica's fund business has since shifted to Sun life's minority holding, CI Fund Management Inc. New business from Clarica pushed CI's net June sales to $506-million, making CI the month's best sales performer.
Final fund sales data for June are expected July 15, including analysis of the flow of investment dollars. Several fund firms reported business as usual, with strong demand for income-generating products, especially income trust funds and balanced funds.
The market's obsession with yield means many investors may be missing out on strong gains generated by the Canadian equity funds, said Mark Chow, an analyst at Morningstar.ca.
Rising oil prices, as well as strength in commodities and the dollar, pushed all five Canadian equity fund categories tracked by the research firm to June returns of better than 2 per cent. The Morningstar Canada natural resources fund index rose 7.3 per cent during the month, followed by the precious metals fund index, at 7.2 per cent.
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.