Investors snapped up a net $1.6-billion in mutual funds last month, better-than-expected results that indicate this year's registered retirement savings plan sales season will trump 2005's results.
"It's going to end up being a robust sales season," said Frank Hracs of industry research firm Canadian Mutual Fund Analyst. He expects long-term fund sales in the first quarter of this year to reach about $15-billion, up about 58 per cent from the $9.5-billion reported in the first three months of last year.
January net sales are about $150-million above the Investment Funds Institute of Canada's sales estimate released earlier this month. On Feb. 2, the industry trade group forecast net sales of between $1.2-billion and $1.7-billion for an average of $1.45-billion. Fund sales from RBC Asset Management Inc. and Dynamic Mutual Funds exceeded expectations, industry sources said.
Industry net sales in December and January totalled $3.2-billion. The results are a 75-per-cent increase from the $1.8-billion in funds sold during the same two month period last winter. The December-January sales are the industry's best results since the winter of 2002 when $4.7-billion in funds were sold during the same period, IFIC reported.
"It will be a good year, a solid year," forecast Joe Canavan, chairman and chief executive officer of financial advice firm Assante Corp. in Toronto.
A strong economy, stable interest rates and commodity prices and a good earnings outlook for many companies means "people are going to be excited about the market . . . I would say investors are going to continue to invest, it's just a matter of where are the flows going to be," Mr. Canavan said.
Conservative, income generating funds continued to dominate industry sales. Balanced funds were the biggest sellers in January, with net sales of $965-million. Dividend and income funds were second in demand, generating $766.8-million in net sales followed in third place by bond and income funds with $704.8-million in net sales.
Foreign common share funds were the month's dark horse category. January foreign equity sales rose to $133-million, ending 21 consecutive months of net redemptions.
"It's taken a bit of time, but Canadians are apparently now taking advantage of the removal of the foreign content limit," which was announced about a year ago and received Senate approval last June, said Joanne De Laurentiis, IFIC's president and chief executive officer.
After three strong years for Canadian equities, a growing number of financial advisers are urging clients to take profits at home and look overseas for growth, said Dan Richards, a Toronto fund marketing consultant.
"People are stepping back and saying: 'Maybe its time to broaden the portfolio,' " Mr. Richards said, adding that an equity portfolio holding one-third Canadian stocks, one-third U.S. shares and one-third international equities makes "a lot of sense."
Indeed, Investment Planning Counsel Inc. of Mississauga has been urging clients to diversify into foreign markets for "a long time," president Chris Reynolds said.
Energy stocks and trusts account for 26.8 per cent of the S&P/TSX composite index, a hefty weighting that makes IPC advisers "nervous," Mr. Reynolds said. "In foreign equities there is a lot more value to be found."
While conservative, income-generating funds continued to dominate fund sales last month, demand for foreign equity funds rose for the first time in 21 months as Canadians finally began to take advantage of the removal of foreign content limits.
Year-to-date net new sales to Jan. 31, 2006, excluding reinvested distributions, $'000
|Fund type||Jan., 2006||Jan., 2005||% change|
|Canadian common shares||140,203,913||115,731,010||21.1|
|Foreign common shares||93,408,408||89,365,276||4.5|
|Bond and income||63,339,555||52,326,184||21|
|Foreign bond and income||6,181,059||6,149,086||0.5|
|Dividend and income||72,493,540||55,728,426||30.1|
|U.S. common shares||32,105,616||33,388,811||-3.8|
|Foreign money market||1,894,669||1,958,596||-3.3|
SOURCE: INVESTMENT FUNDS INSTITUTE OF CANADA
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