Fund investors returning to risk

The mutual fund industry was hit with another month of net redemptions, totaling $462.6 million in August. Investors pulled a net $2.26 billion out of money market funds, but invested a net $1.8 billion in long-term funds.

So far this year, net long-term fund sales have totaled $7.8 billion, compared to net redemptions of $1.6 billion in the first eight months of 2008.

“We have seen a 25% increase in long-term fund assets over the last six months which translated into a $100 billion improvement, collectively, in Canadians’ long-term fund holdings,” said Pat Dunwoody, vice-president, member services and communications at IFIC.

While investors were willing to dip their toe back into the risk pool, they were not quite ready to dive in. Balanced funds remained the most popular option, with net inflows of $1.24 billion. Year to date balanced funds have attracted $4.57 billion in net sales.

Slightly less risky bond funds attracted $1.08 billion in new money, bringing the year to date total to $7 billion.

The deeper end of the risk pool proved too much for investors, as straight equity funds saw $531.6 million in net redemptions. So far 2009 has not been kind to equity funds, with $3.31 billion in net redemptions.

Using narrower fund categories, domestic fixed income led sales, totaling $838.7 million. The top three fund categories were rounded out by domestic balanced funds ($701.8 million in net sales) and global balanced funds ($541.4 million in net sales).

August’s money market redemptions were “driven primarily by investor movement back into long-term fund categories as well as movement into other interest-bearing investments — often offered within the same financial institution,” according to IFIC.

Global and international equity funds ranked second in terms of net redemptions, with $269.4 million pulled out by investors, narrowly edging out domestic equity funds, which were hit by $268.2 million in net redemptions.

Industry assets totaled $567.6 billion at the end of August, up from $556.7 billion in July, but still far below the $634.8 billion total at the end of August 2008.

Among firms that report to IFIC, Scotia Securities posted the best fund sales, based on primary investment management role, with $338.3 million in net sales. Fidelity ranked second, with $ 239.9 million in net sales, followed by Dynamic with $208 million.

RBC was hardest hit, with total redemptions of $1.12 billion, driven by $1.59 billion in money market redemptions. No other firm was even close, as Invesco Trimark posted the second highest net redemption total, with nearly $240 million.

(09/15/09)