The Investment Funds Institute of Canada reports that conservative investment funds that invest in other funds were much more popular with Canadian investors than stand-alone funds last year.

Fund-of-funds sales outnumbered sales in stand-alone funds by about 12 to one on a per fund basis, IFIC reported in its annual review of the mutual fund industry.

Sales in the average fund-of-fund in 2007 were $5.1 million a month compared with the average stand-alone, long-term fund’s net sales of $429,000 a month. Net new money into fund-of-funds reached $16.2 billion for the year, and investors also switched an additional $4.2 billion into fund-of-funds.

“Fund-of-funds are seen as part of an overall investment strategy, strengthening the diversification of an investor’s portfolio,” says Pat Dunwoody, vice president of member services & communications at IFIC. “They are ideally suited for managing market risk.”

IFIC also noted that the rapid appreciation of the Canadian dollar from March to May and August to the end of October sent investment money into U.S. money market funds ($14.9 million per fund over April to June and $55.1 million per fund over September to November). The high dollar also muted sales in fund categories with higher currency risk in the latter half of the year, such as global equity and U.S. equity, it added.