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'Really good start' seen in mutual funds

Net sales in March are expected to reach $3.8-billion, best RRSP showing since 2004

MUTUAL FUNDS REPORTER

Mutual fund net sales in March are expected to reach $3.8-billion, making this year's registered retirement savings plan sales season the industry's best showing since 2004.

The Investment Funds Institute of Canada estimated that net sales ranged between $3.5-billion and $4.1-billion last month, up from $3.4-billion a year earlier. The industry's total net assets are expected to hit a record $609-billion.

The March figures mean this year's RRSP net sales will reach an estimated $10.3-billion, up from $9.4-billion in net sales reported in the first three months of 2005. It's the sector's best performance for the key sales period since the $10.9-billion in net sales reported in 2004.

"It's a really good start" to 2006, said Joanne De Laurentiis, IFIC's president and chief executive officer. Early data indicate investors favoured long-term balanced, bond and dividend and income fund categories, she said. In contrast, there was "little parking" of dollars in money market funds, suggesting "a greater level of confidence" in the market, she said.

CI Financial Inc. was the month's big winner, reporting $772-million in net sales. About half of net sales, however, were due to the Toronto fund company's decision to end a $350-million subadvisory relationship with AIM Funds Management Inc. and manage the money in-house.

RBC Asset Management Inc., the fund arm of Royal Bank of Canada, was close behind CI, reporting $719-million in net sales. Toronto-Dominion Bank's TD Asset Management was the month's third-biggest seller, reporting $592-million in net sales. IGM Financial Inc., Canada's largest fund company that includes Investors Group and Mackenzie Financial Corp., reported $582-million in net sales. BMO Funds, the fund arm of Bank of Montreal, was in fifth place, reporting $228-million in sales.

The shift in fortunes at Fidelity Investments Canada Ltd. and AGF Management Ltd. continued with the two firms reporting their second consecutive month of net sales. Fidelity, the Canadian arm of the U.S. fund giant, reported net sales of $170-million while publicly traded AGF reported net sales of $63.3-million.

"With a few exceptions, almost every complex is strengthening," said Peter Loach of BMO Nesbitt Burns Inc. The fund analyst forecasts March sales will come in between $4.2-billion and $4.5-billion. "The trend is in place and there's no reason it's going to turn. The overall market remains healthy."

Indeed, five fund companies were exceptions to the improving sales trend. The loss of CI's business helped make AIM Funds the month's biggest loser of investment dollars, reporting net redemptions of $668-million. Privately owned AIC Ltd. continued to struggle, reporting net redemptions of $140-million.

March was not kind to all of the big banks. Canadian Imperial Bank of Commerce's CIBC Asset Management lost $56-million in business while Bank of Nova Scotia's Scotia Securities Inc. reported net redemptions of $40-million. Altamira Investment Services Inc., a unit of National Bank of Canada, continued its many months of redemptions, reporting lost business of $29-million.

There are early indications that investors are warming up to international funds. Three foreign market funds accounted for more than 50 per cent of Saxon Financial Inc.'s $37-million in net sales of mutual funds last month.

Allan Smith, Saxon president and chief executive officer, described renewed interest in foreign markets as "a very good shift in the mindset of investors . . . they are making investments early in an asset class that's poised to have some better-than-average gains," he said.

Promising start

Mutual fund sales are on course to post their best RRSP season in two years as robust equity markets, at home and abroad, attract new dollars.

RRSP net new sales

March sales and year-to-date sales, $billion

1998$8.70 $19.30
19994.211.2
20004.412.2
2001411.1
20022.39
2003-0.107-0.91
20044.110.9
20053.49.4
*2006*3.810.3

The winners

Fund companyMarch net sales ($million)* Sales Jan.-March ($billion)Total assets under management ($billion)
1CI Financial$772 $1.3$55.4
2RBC Asset Management7192.563.6
3TD Asset Management5921.646.5
4IGM Financial5821.499.2
5BMO Funds2280.927.0

The losers

Fund company March redemptions ($million)*Redemptions Jan.-March ($million)Total assets under management ($billion)
1AIM Trimark Investments$668 $1,350 $46.2
2AIC1404649.0
3CIBC Asset Management562546.8
4Scotia Securities4013715.5
5Altamira Investment Services291133.9

'It's a really good start" to 2006. There was "little parking" of dollars in money market funds, suggesting " a greater level of confidence" in the market.'

JOANNE DE LAURENTIIS,

NEW IFIC PRESIDENT AND CEO

*estimate

SOURCE: INVESTMENT FUNDS INSTITUTE OF CANADA

© 2007 The Globe and Mail. All rights reserved.

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