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Mutual Fund News

RRSP season starts with a bang as fund sales double '05

MUTUAL FUNDS REPORTER

This year's registered retirement savings plan season is off to a heady start, with Canadians investing an estimated $1.45-billion in mutual funds last month, more than double net sales reported in January, 2005.

"Strong markets, mixed with investors' appetite for long-term savings, especially RRSPs, boosted assets," said Joanne De Laurentiis, newly appointed president and chief executive officer of the Investment Funds Institute of Canada.

The January estimate of between $1.2-billion and $1.7-billion in net sales is a significant jump over net sales of $660.7-million reported for the same month a year ago. The preliminary figure follows December net sales of $1.7-billion, and marks the 15th successive month of positive net sales for the industry.

The fund arms of three of Canada's largest banks -- Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal -- were the big winners. Royal reported a stunning $696-million in net sales, followed by TD, with $370-million, and BMO, with $174-million.

Toronto-based Dynamic Mutual Funds Ltd. was another strong performer, reporting $340-million in January net sales.

"The banks completely dominated, and will take a huge share of fund flows this season," said Peter Loach, a fund analyst at BMO Nesbitt Burns Inc.

He expects the banks will account for up to 75 per cent of net sales this RRSP season.

The preliminary results bode well for the next two months, said Frank Hracs of industry research firm Canadian Mutual Fund Analyst. January net sales of long-term funds typically represent between 15 per cent and 20 per cent of the entire RRSP season, indicating sales of between $12.5-billion and $16-billion in this year's first quarter.

If the forecast is correct, the 2006 RRSP season will see a "respectable improvement" over the $9.5-billion in long-term fund sales recorded in 2005 and the $10.5-billion reported in 2004, Mr. Hracs said.

An estimated 10 companies suffered net redemptions last month. Toronto-based AIM Funds Management Inc., crown jewel of Britain's Amvescap PLC, was the biggest loser, reporting net redemptions of $396-million. A strong dollar, weak foreign markets and limited energy exposure have meant six successive months of redemptions for the company, whose brands include AIM and Trimark.

Slowing gross sales are behind the weak results, said Dwayne Dreger, AIM spokesman. "We are quite willing to look wrong in the short run to be right in the long run. . . . In the short term, it's possible that we'll see continued pressure on our gross sales numbers."

There was little good news for several companies struggling to stem many months of customer losses. AIC Ltd., Altamira Investment Services Inc. and AGF Management Ltd. saw net redemptions rise last month over December.

Toronto-based Fidelity Investments Canada Ltd. was an exception, with redemptions shrinking to $26-million in January, down from $41-million in December.

There's little sign that well-established investing trends are shifting, said Gavin Graham at Guardian Group of Funds Ltd. of Toronto. "It's more of the same," he said, noting strong demand for dividend, income and balanced funds.

© 2007 The Globe and Mail. All rights reserved.

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