Mutual fund sales in May came in at the high end of the Investment Funds Institute of Canada’s preliminary estimate of between $497 million and $997 million, with actual net sales totaling $939.2 million.
Among the companies that report sales data to IFIC, the industry saw $1.93 billion in long-term fund sales, which were partially offset by $992.9 million in money market fund redemptions.
Total industry assets under management rose by $20.1 billion (3.8%) in May to end the month at $538 billion, up from $517.7 billion in April and $507.1 billion at the start of 2009. Total AUM was, however, down from this point last year ($656.6 billion).
Pat Dunwoody, IFIC’s vice-president, member services and communications, believes with long-term fund sales at their highest level since February 2008 and money market fund redemptions at a high point, Canadians are moving back into the market.
The overall growth in assets carried through to all the broad asset classes with the exception of money market funds, which fell from $74.4 billion at the end of April to end May at $73.1 billion, and specialty fund assets, which were unchanged from April. Assets in money market funds have been declining since March as investors have increasingly moved back into long-term funds.
At $1.93 billion, long-term fund sales were the highest they’ve been since February 2008, due to strong bond ($1.17 billion) and balanced fund sales ($850.8 million).
According to Rudy Luukko, investment funds editor of Morningstar Canada, the trend is positive in that there is new money flowing into long-term funds. But investors continue to be wary, and this caution is reflected in bond funds still being the best selling asset class in May followed by balanced funds. By comparison, equity fund sales in May were rather modest.
The equity fund space barely managed to get out of the red in May, with $13.6 million in net sales, with both sector equity fund and domestic equity fund sales managing to stay positive. Sector equity fund sales totaled $69.8 million, due almost entirely to strong natural resource equity fund sales ($135.4 million).
Year to date, equity fund net redemptions slowed to $2.17 billion from the previous year, $4.42 billion, though net redemptions over the last 12 months were higher than in the previous 12 months.
Luukko says the overall firming of sales is consistent with the general trend of investor confidence getting a lift when markets begin to improve. However, he adds money flowing out of money market funds into long-term funds is also due to the extremely low short-term interest rates. “There’s little or no return for money market fund holders. Long-term funds currently provide the only chance of staying ahead of inflation in the long term.”
Long-term sales were focused primarily in domestic fixed income fund categories, with domestic fixed income fund sales touching $757.2 million, Canadian short term fixed income fund sales at $609.7 million, and Canadian fixed income fund sales netting $140.4 million.
On the bond fund side, global and high yield fixed income fund sales amounted to $409.3 million — $398.4 million in high yield fixed income fund sales, and $10.9 million in global fixed income fund sales.
According to a preliminary tally from a selection of IFIC members, Royal Bank Asset Management posted the highest net sales in May, at $667 million, including $426 million for long-term funds. Dynamic mutual funds came next, with $328 million of net sales including $361 million at long-term funds, offset by $33 million in net redemptions from money-market funds.
CIBC Asset Management, on the other hand, had $591 million in net redemptions overall, as $155 million of net sales in long-term funds was offset by $746 million withdrawn from money market funds.
Invesco Trimark followed with $327 million in redemptions, including $293 million from long-term funds and $34 million from money market funds.
(06/15/09)