Mutual funds sales for December – in fact, much of 2010 – were reminiscent of Goldilocks. Investors found some fund categories too hot for their liking (equity), while others were starting to cool off (fixed income). Great luck for balanced fund managers, as investors opted for the “just right” asset mix.

“Long term fund sales have been consistently strong throughout 2010 as has long term fund asset growth, which made 2010 a great year to be in the market,” said Jon Cockerline, director of policy at the Investment Funds Institute of Canada.

“What we are really seeing in the mutual fund flows in 2010 is a return to the pre-downturn sales trend, an investor focus on balanced funds and fund-of-funds over other types of stand-alone funds.”

By the end of 2010, the mutual fund industry’s assets under management had grown 12.3%, to $635.7 billion, according to the final tally by IFIC. Net sales for the year were $12 billion, with $1.3 billion of that coming in the final month.

Long-term assets totaled $598.7 billion, up from $581.7 billion in November, while money market assets totaled $36.9 billion.

Long term fund sales for December totaled $2.31 billion, capping off a strong year that pulled in $29.2 billion in new money. That made 2010 the best year for long term funds in the decade.

Investors continued to shift their preference toward balanced funds, which took in $2.41 billion in net sales for December. Full year net sales totaled $26.1 billion, nearly double that of 2009.

The previous investor favourite – fixed income funds – have seen declining inflows since September. December sales brought in $694.4 million, down from the $1.07 billion in net sales seen in November. Full year sales tallied up to $10.3 billion, down from $12.8 billion in 2009.

Pure equity funds continued to struggle in December, posting net redemptions of $794.5 million, more than double the outflows of November. Full year equity fund net redemptions totaled $7.01 billion, indicating that investors are still not interested in taking on too much risk.

Money market funds continued to suffer net redemptions, with $17.2 billion in net outflows for the year.