An aging population with a great desire for stable, income-generating investments are driving mutual fund manufacturers to produce more payout portfolios and hard asset funds, said Dan Hallett, president of Windsor, Ont.-based Dan Hallett & Associates Inc., at the Investment Funds Institute of Canada’s annual conference in Toronto on Tuesday.
Infrastructure funds, which invest in companies involved in municipal sewage and pipeline construction, for example, are the latest development in the hard asset category, Hallett said. Currently, the segment has fewer than 10 funds and totals $300 million in assets under management.
“They offer good diversifying power,” Hallett said. “Big institutions have been investing in them for a number of years … mainly because of their constant payouts and inflation protection.”
In addition, clients looking to manage their risk are spurring the shift toward more payout portfolios or income-oriented products, he added. These include income trusts, dividend funds and other diversified payout funds.
“As investors get older, there is greater need to manage the withdrawal time frame,” Hallett said. “It all comes down to volatility and risk management.”
And because of shaken investor confidence, other trends in the mutual fund industry include converging balanced funds with other products such as money market or corporate-class funds, said Hallett.
For example, existing Treasury bill and corporate-class funds are getting converged into “flexible T-series” funds, he added. These funds still give investors a diversified portfolio with a high level of distribution, but now come with the option of systematic withdrawal.
Finally, hybrid products are also gaining favour. He said these include a “mish-mash of things” and focus on merging investment and insurance products together. They can include guaranteed minimum withdrawal benefit products or principal-protected notes.
IFIC: Mutual fund companies focus on safety
Hard asset funds, payout portfolios, enhanced balanced funds and hybrids are the products of choice for today’s clients
- By: Olivia Glauberzon
- September 23, 2008 September 23, 2008
- 18:00