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Mutual Fund News

Balanced funds back in favour


Investors plowed $1.97-billion into balanced, bond and equity mutual funds in June - the highest net sales for the month since 1997.

But the industry suffered from overall net outflows of $834.7-million, stemming from investors fleeing money market funds, according to figures released yesterday by the Investment Funds Institute of Canada (IFIC). The industry last suffered from net redemptions in December.

The outflows are not a big concern because a lot of the people in short-term money market funds have not been typical mutual fund investors, Dennis Yanchus, IFIC's manager of statistics, said yesterday.

"They were coming into money markets because of a reaction to the credit crunch, and falling yields in other interest-bearing securities," Mr. Yanchus said. "We are seeing a lot of that money moving back into alternatives like high-interest savings accounts and GICs [with higher yields]."

North American markets have rallied since their March lows, but were flat in June. The S&P/TSX composite index has had a total return of 17.6 per cent for the first six months this year.

While investors are willing to step off the sidelines into long-term funds - which are more profitable for the industry because they charge higher fees - they are gravitating mainly toward balanced and high-yield bond funds, Mr. Yanchus said.

Stock markets in September and October can be volatile, but if their movements are smoother this year, "then I would expect to see more people moving possibly back into equity funds," he said. "For the most part, it has really been balanced funds. That is pretty normal after a downturn."

During June, RBC, which includes RBC Asset Management and Phillips Hager North Ltd., suffered from $871.9-million in net redemptions - all from money market funds.

Other firms with net redemptions included Fidelity Investments Canada ULC with $494.1-million in net outflows; CIBC Asset Management, $411.9-million, and Invesco Trimark Ltd., $334.3-million.


By the numbers

Mutual fund flows in June versus other periods
$Millions Jun-09 May-09 Jun-08
Equity Funds
Domestic Equity76.541.9-430.8
Global & International Equity-415.5-76.5-421.0
U.S. Equity95.0-21.634.7
Sector Equity39.969.85.1
Balanced Funds
Domestic Balanced935.2464.8266.7
Global Balanced195.5386.0488.8
Fixed Income Funds
Domestic Fixed Income475.1757.2-21.8
Global & High Yield Fixed Income580.7409.32.0
Specialty Funds -11.1-98.997.8
Long-term Funds Total 1,971.201,932.2021.50
Money Market Funds -2,805.9-992.91,221.5
Total Mutual Funds -834.7 939.2 1,243.0
Source: Investment Funds Institute of Canada

© 2007 The Globe and Mail. All rights reserved.

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