Between credit market turmoil and a slew of regulatory issues, the Investment Funds Institute of Canada has faced no shortage of challenges this past year, president Joanne DeLaurentiis told attendees at the IFIC conference in Toronto on Tuesday.

“The past year has been a challenging one for both investors and for the financial services industry as a whole,” she said. “The U.S. credit crisis has turned out to have much longer-lasting effects on the financial markets and the real economy than first thought, and Canadian capital markets have also been affected.”

But the mutual fund industry’s efforts over the past few years have been effective in minimizing the impact of market volatility on the savings of Canadian households, DeLaurentiis noted.

For example, the introduction of such products as target-date funds, wraps and retirement payout/income replacement funds are providing Canadians with investments that focus on overall diversification and consistent long-term performance in all types of economic conditions, she said.

“These long-term efforts have paid off,” DeLaurentiis said.

She pointed to the last financial downturn, when balanced funds made up just 16% of the market. Now, such funds make up 36% of the mutual fund market, representing a much higher level of diversification that has helped investors weather the recent market volatility.

In an overview of IFIC’s activities during the past year, DeLaurentiis said a marked increase in regulatory initiatives from both regulatory and non-regulatory bodies has consumed much of its focus.

IFIC has worked to voice its opinion in such regulatory initiatives as the client-relationship model proposals released by the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada, the new framework for point-of-sale disclosure and Canada’s commitment to fully adopt international financial reporting standards by 2011.

Although IFIC has worked at strengthening the relationship between regulators and the industry, DeLaurentiis said the consultation process still falls short.

She proposes two changes to the process: banishing the practice of providing only 30-day comment periods for initiatives and striking implementation committees of regulatory and industry experts to work through operational problems once a new rule is in place.

For the coming year, IFIC will focus on two national instruments that apply to mutual funds. Specifically, it will pursue a review of mutual fund disclosure requirements as well as aim to obtain more flexibility in National Instrument 81-102, which doesn’t fully recognize investment trends and developments, hampering innovation and competition.