Canada’s mutual fund industry enjoyed almost $3.5 billion in net sales for May, led by more than $2.9 billion in long-term sales, according to the Investment Funds Institute of Canada.

May’s total is up from last May’s $2.5 billion in net sales, although the gap between this year and last year is much smaller in terms of long-term net sales ($2.9 billion this year versus $2.6 billion last year).

“The industry is pleased with the ongoing support by the investing public to mutual funds,” said Pat Dunwoody, IFIC’s vice president, member services & communications. “Sales were $3.5 billion in May, while assets under management rose to $711.9 billion fuelled by strong capital markets.”

Balanced funds led the way in May, generating $2.5 billion in net sales, including more than $1.3 billion in domestic balanced funds. Equity funds contributed just $371 million in net sales, as $943 million in global equity sales was offset by net redemptions from all other equity categories.

The banks remain the leading sellers in May, with RBC Asset Management generating almost $600 million in overall net sales, followed closely by TD Asset Management at $565 million.

It’s a big drop off from the big two banks to third place, AGF, with $261 million in net sales. There are a handful of other firms that broke the $200 million barrier in May, including IGM Financial, Dynamic Mutual Funds and Desjardins. The plus $100 million club includes Brandes, BMO, Franklin Templeton, CIBC Asset Management and IA Clarington.

AIC remains is net redemptions, as does Acuity, and a handful of smaller firms.

IFIC noted that for the first five months of 2007 net sales into long-term mutual funds reached $21.9 billion, up from less than $15 billion for the same period a year ago. This also represents the highest absolute dollar result for the period since 1998. In the past 12 months, net sales into long-term funds were $28.7 billion or 5.2% of beginning assets.

In addition to the robust net sales, strong capital markets helped propel long-term mutual fund assets to $663.8 billion, growing over 20.4% on a year-over-year basis. IFIC notes that this sustains the double-digit growth trend that has been in place since 2003.