Statistics may not be everyone’s forte, but they are an essential part of the financial services sector.
Investors want to know how much they need to put away for a down payment on a house, the return on an investment or how much is required to retire in comfort.
Indeed, many investors rely on their advisors for advice on many of these kinds of issues. A study commissioned by the Investment Funds Institute of Canada last year found that 85% of mutual fund holders surveyed said they purchased funds from advisors because they would receive advice and guidance.
Advisors should be able to get even more information from a two-step plan that IFIC began last fall to help explain industry statistics in the mutual fund industry.
For years, IFIC (www.ific.ca) has been providing industry statistics on sales and assets under management of about 95% of the country’s mutual fund managers and dealers. The data have focused on stand-alone mutual funds and companies’ proprietary funds of funds, capturing mutual fund AUM and the net sales for each company that participates in IFIC’s statistical reporting.
There is, however, much more to the statistics.
Last October, IFIC embarked on Step 1 of its project to expand statistics when it added a number of charts with easy-to-read explanatory descriptions and highlights to complement the actual statistics it provides.
The industry, however, has expanded in the recent past, especially in the area of wrap accounts and non-proprietary funds of funds. Since the end of 2003, there has been significant growth in fund wraps, although the increase in AUM for stand-alone funds has had a more than respectable run as well.
Data from Investor Economics Inc. of Toronto show fund wrap AUM grew at a compound average annual rate of 25.6% from the end of 2002 to June 2006. In the same period, the growth in AUM of stand-alone mutual funds was 10%. On a year-over-year basis, fund wraps grew 25.8% in 2005, while stand-alone funds posted 13.1% growth.
Step 2 of IFIC’s plan includes not just the stand-alone and proprietary funds of funds, but also non-proprietary funds. Specifically, the new view will capture AUM and net sales that investment clients have invested directly in the mutual funds of each company — both the top fund managers and the managers of the underlying funds. The new view is reporting all the companies in which investors are putting their savings, more accurately reflecting the asset classes of the funds. It shows where both the money is managed and where clients are making their purchases, giving a broader and more accurate view of the mutual fund industry in Canada.
In addition, IFIC has reorganized its broad asset classes to reflect the type of asset classes now used in the industry. IFIC has matched its classes to those of the Canadian Investment Funds Standards Committee, including the enhanced revisions made by the CIFSC last summer.
Although there has been minor tweaking in IFIC statistics over the years, this is the first major overhaul. An IFIC task force, set up about 10 months ago to help pull the new statistics together, continues to look at ways it can make industry statistics more meaningful to investors and advisors. IE
Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.