Mutual fund-of-funds or so-called "wrap" accounts are dominating industry sales this registered retirement saving plan season.
Packaged portfolios of mutual funds accounted for about $6.3-billion in net sales in January and February, about 53 per cent of total net sales of $11.9-billion during the two month period. More than $98-billion of funds are held in wrap accounts, representing about 14 per cent of industry assets, the Investment Funds Institute of Canada reported yesterday.
Fund-of-fund portfolios are "all about providing an overall investment solution" customized to meet an investor's needs, said Dan Richards, a Toronto industry consultant.
Wraps have been a huge success for the big banks, allowing them to provide client-specific financial advice, while at the same time maintaining control of an investment portfolio, Mr. Richards said. Three banks -- Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Royal Bank of Canada -- dominate the fund-of-fund market and together, account for about half of all wrap assets under management.
Wraps are a defensive strategy, too. Quotential, a portfolio product launched by Franklin Templeton Investments Corp. in 2002, was a cost-free means for the Toronto-based fund company's clients to shift money from out-of-favour global equity funds and into the popular Bissett fund family. Today, Quotential is one of the country's most successful wraps, with more than $7-billion in assets.
Some fund companies are using wraps as a means to sweeten the compensation of financial advisers and, ultimately, build business, said fund analyst Peter Loach at BMO Nesbitt Burns Inc. Recent offerings from AGF Management Ltd., Altamira Investment Services Inc. and Dynamic Mutual Funds Ltd., all of Toronto, pay above-average "trailers," an annual fee based on the client's assets invested, he said.
"Wraps have provided a huge sales boost to firms in trouble," Mr. Loach said.
Total mutual fund sales in 2007 will top $30-billion, up from 2006's fund tally of about $21-billion, estimates Frank Hracs of research firm Canadian Mutual Fund Analyst. As of Feb. 28, Canadians had a record $679.7-billion invested in mutual funds.
Biggest wrap managers
|CIBC Asset Manaement||$19.6|
|TD Asset Manaement||15.9|
|RBC Asset Management||13.9|
|Federation des caisses Desjardins||2.1|
|ATB Investment Management||2.1|
SOURCE: INVESTMENT FUNDS INSTITUTE OF CANADA
© 2007 The Globe and Mail. All rights reserved.
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