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Mutual Fund News

Confident investors move cash to long-term funds

FUNDS REPORTER

Canadian investors stashed nearly $170-million of new money into mutual funds in December amid renewed confidence in stock markets.

This was the second consecutive month of net sales, and contrasts with the $749-million in net outflows a year ago amid a market collapse, according to preliminary estimates released yesterday by the Investment Funds Institute of Canada (IFIC).

"Investors are much more comfortable in investing," said Frank Hracs, chief economist of Credo Consulting. "All the fear happened last year."

But the real story is strength in net sales of long-term funds at around $2.3-billion in December, which should boost the fourth-quarter number for 2009 to about $6.5-billion, he said.

"That is likely the best since 1997," Mr. Hracs said. "There was aversion to fund demand in the second half of 2008, and so there is a lot of catch-up demand happening."

Long-term funds, which invest in stocks and bonds, are a key metric in the mutual fund industry because these investments charger higher management fees than short-term money market funds.

The trend should bode well for the upcoming registered retirement savings plan (RRSP) season with long-term fund net sales in the first quarter possibly matching the $14-billion in the same period in 2007, he said.

"It looks like we are on course for a very solid first quarter despite what happened last year. The psychology is completely reversed. ... Investors have gotten back in very aggressively through the last three quarters."

North American stock markets last month extended their most recent rally that began in November. The S&P/TSX composite index climbed 2.6 per cent, while the S&P 500 composite index rose 1.8 per cent.

Nuvi Purmasir, a statistics analyst at IFIC, said that net sales of mutual funds last month were lower than the $439-million in November, but that was largely due to the holiday season when fewer Canadians are thinking about investing.

Key to the industry is the fact that total assets rose $87.4-billion to $594.4-billion through the year, he added.

Scotia Securities Inc. was the leader in net sales last month, attracting $421-million, followed by Fidelity Investments Canada with $313-million.

RBC, which includes RBC Asset Management Inc. and Phillips Hager & North Ltd., suffered from $719-million in net redemptions, but it was all in money market funds.

That figure stems from about $1.2-billion in net redemptions from money market funds, and $444-million in net sales of long-term funds.

"Investors appear to be moving off the sidelines, and taking a 'back-to-basics' approach as they redeploy their money into balanced and risk-adjusted investments," said Doug Coulter, president of RBC Asset Management.

***

Last month's fund winners

How the top 12 fund companies fared in December, 2009.

Total Total
Total Total Net Sales of Net Sales of
Net Assets Net Sales Long-Term Mny Mkt
of Funds of Funds Funds Funds
Fund Company Millions
Scotia Securities Inc. $21,501$421$448-$27
Fidelity Investments Cda$43,609$313$346-$33
Dynamic Mutual Funds $24,620$275$288-$13
TD Asset Management $55,090$127$575-$448
BMO Financial Group$35,056$122$136-$14
CI Financial Corp.*$62,704$100$81$19
IGM Financial Inc. $100,022-$19$74-$93
CIBC Asset Management $45,306-$27$227-$254
Franklin Templeton$20,852-$93-$69-$24
AGF Investments Inc.$22,833-$103-$93-$11
Invesco Trimark Ltd.$29,285-$390-$368-$22
RBC$101,732-$719$445-$1,164
*CI Financial Corp. is not a member of the Investment Funds Institute of Canada. Its figures include mutual and segregated funds.
Source: Investment Funds Institute of Canada, companies

© 2007 The Globe and Mail. All rights reserved.

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