Investment professionals are expecting the mutual fund business in 2006 to look a lot like last year, with dividend, income and yield-generating products likely to dominate the marketplace.
"The dividend story is here to stay," said Gavan Graham, director of investments at Guardian Group of Funds Ltd. of Toronto. Yields on bonds and guaranteed investment certificates have improved in recent months but the gains are unlikely to affect the hunger for high-yield, diversified blue-chip equity funds, he said.
Strong financial markets and surging sales boosted assets in mutual funds to a record $570-billion in 2005, from $497.3-billion in 2004, the Investment Funds Institute of Canada reported yesterday.
Net sales in 2005 stood at $23.4-billion, the highest for the industry since 2001, the trade group said. Intense demand for yield from small investors made three categories -- balanced; dividend and income; plus bond and income -- the top fund category sellers last year.
The fund sector has unveiled a long list of new products in recent weeks aimed at meeting demand. Several have a global perspective aimed at taking advantage of the end of the 30-per-cent cap on foreign content held in registered retirement savings plans.
Altamira Investment Services Inc. of Toronto yesterday raised the rates of its fast-growing High-Interest CashPerformer accounts. The estimated $3-billion Canadian currency account's rate of interest rose to 3.15 per cent, from 2.75 per cent.
Earlier this month, Investors Group Inc. of Winnipeg launched the Investors Global Dividend Fund, aimed at building income via global companies. Toronto-based CI Financial Inc. announced the Portfolio Select Series, an investment program that combines strategic asset allocation with enhanced customization options and a tax-efficient investment platform.
In December, Franklin Templeton Investments Corp., also of Toronto, began marketing Templeton Global Income Fund, a monthly-pay global balanced fund that will invest in dividend-paying equities and fixed-income securities.
"Investor's appetite for those types of funds doesn't seem to have slowed down," said Dan Hallett, a Windsor, Ont.-based independent fund analyst. "Fund companies will continue to feed in to that. You are still seeing products aimed at yield and monthly payouts."
Aging baby-boomers with a conservative investment profile are driving the sales trend, said Chris Reynolds, president of Investment Planning Counsel of Canada Ltd., a Mississauga company with about 550 financial advisers.
"Clients are much more concerned with preservation of capital," he said. "Growth is not one of their biggest priorities; it's all about how do I maximize the earnings of my investments? I think this trend is here to stay."
The increases in the fund industry's assets and sales in 2005 are in tandem with the S&P/TSX composite index's heady climb of 21.9 per cent over the past 12 months, outpacing all other major North American indexes.
The fund industry's December sales were strong, coming in at $1.7-billion -- the best performance for the month since $2.2-billion reported in 2001.
Among the largest companies, the fund arm of Toronto-based Manulife Financial Corp. enjoyed the strongest asset gains, up a stunning 60 per cent to $7.8-billion, from $4.9-billion at the end of 2004. The Elliott & Page Monthly High Income Fund accounts for about $3.4-billion of Manulife's retail assets under management. Dynamic Mutual Funds Ltd., an income fund pioneer also based in Toronto, was in second place, with assets under management climbing 31 per cent to $14.7-billion last year.
Acuity Funds Ltd. of Toronto was the fastest-growing boutique fund company; its assets under management soared 98 per cent to $2.8-billion last year. On the downside, AIC Ltd. of Burlington, Ont., saw assets fall nearly 20 per cent, while Toronto-based AGF Management Ltd.'s assets slid 2 per cent per cent.
A very good year
Annual net sales of mutual funds in 2005 stood at $23.4-billion, the highest for the industry since 2001.
Year-to-date net new sales to Dec. 31, excluding reinvested distributions, $'000
|Canadian common shares||-2,492,408||-1,566,299||-59.1|
|Foreign common shares||-3,038,074||-2,135,969||-42.2|
|Bond and income||8,106,691||5,647,676||43.5|
|Foreign bond and income||696,060||432,926||60.8|
|Dividend and income||10,205,270||8,121,628||25.7|
|U.S. common shares||-979,231||-18,877||-5,087.4|
|Foreign money market||110,512||-228,724||148.3|
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