Mutual funds saw net sales of $2.3 billion in June, compared with just $39 million in same period last year, according to data from the Investment Funds Institute of Canada.

Net sales into long-term funds were just under $1.9 billion, the highest for the month of June since 1998, IFIC noted. Last year, long-term funds were in net redemptions for June.

Almost all of the sales came in balanced funds, more than $1.88 billion. There were moderately positive sales in equity funds ($109 million worth), as global equity sales offset domestic redemptions. However, the positive contribution from equity funds was more than offset by $180 million in net redemptions from bond funds.

In a research note, UBS Securities Canada Inc. reports that overall net sales exceeded the 1995 to 2006 average for the ninth consecutive month. Divergent sector trends continued, with balanced funds recording their 49th straight inflow, whereas domestic equity funds recorded their 15th consecutive outflow, UBS said, adding that global and international equities funds recorded their 10th consecutive inflow. The income trust sector has seen redemptions every month since the tax announcement, UBS noted, with an $87 million outflow in June.

IFIC noted that over the first half of 2007, net sales into mutual funds reached $25 billion, the highest absolute dollar result for the period since 1998. In the past 12 months, net sales into long-term funds reached almost $31 billion.

However, despite the strong net sales in June, increased volatility in capital markets resulted in a decrease in the total mutual fund asset base of 0.8%. Total assets were just under $707 billion at month end. On a year-to-date and year-over-year basis, assets are up by 6.9% and 19.9%, respectively, thanks to a combination of robust net sales and a positive market effect.

Long-term mutual fund assets ended June at $658 billion growing over 20% on a year-over-year basis. IFIC notes that, unlike the asset contraction that took place in 2001 and 2002, the past several years have seen a solid expansion of long-term assets. From 2003 to 2006, annual asset growth has been between 16.2 and 17.4%.

RBC Asset Management led the way in June net sales as usual, with $374 million in long-term sales. Desjardins was a distant second at $202 million. IGM Financial reported $181 million in net sales, BMO had a $158 million and TD was close behind at $154 million. AGF,Dynamic and IA Clarington all had solid monthsm too.

AIC, MD Management, Acuity, and PH&N, among others, had net redemptions for the month.

Pat Dunwoody, vice president member services & communications for IFIC, stated, “Investors have responded to the strong gains they have made in their mutual fund portfolios over the last four years and they continue to invest in long-term funds. trong sales in the balanced fund and global and international equity fund asset classes are also a positive indication that investors are looking to diversify their investment portfolios to reduce overall risk.”