With the U.S. teetering on the edge of recession and the global credit crunch hurting major financial services institutions, investors were cautious in the recent RRSP season. They made Canadian balanced funds their favourite choice of long-term assets, according to Investment Executive’s list of top-selling funds.
Many investors simply parked their money — some $10.9 billion of the $11.2 billion in mutual fund net sales went into money market funds in the four months of November 2007 through February 2008.
“Investors are nervous and hesitant,” says Rose Cammerari, senior vice president of national advisor sales and product marketing with AGF Funds Inc. in Toronto.
That doesn’t mean investors bought only $300 million in long-term funds. They put $2.9 billion into balanced funds while selling off other categories, particularly equity funds.
Managed money, of which balanced funds are a simple example, is an ongoing theme. “We continue to see more and more investors go to packaged or portfolio solutions,” says David Richardson, vice president of RBC Asset Management Inc. in Toronto. “A lot of people want to make one decision about their investments.”
Another popular trend is “going global,” although this RRSP season most of the interest was in global balanced funds or portfolios rather than pure equity funds. In the balanced category, $2.4 billion of the $2.9 billion in net sales went into global balanced; $550 million went into domestic balanced funds.
Investors also put a net $365 million into sector funds and $314 million into specialty funds.
Offsetting this were net redemptions of $1.7 billion in Canadian equity funds, $680 million in global and international equity funds, $677 million in Canadian fixed-income funds, $145 million in global and high-yield fixed-income funds, and $80 million in U.S. equity funds.
What’s surprising is that Canadian balanced funds outnumbered global balanced funds in IE’s list of the top 25 best-selling mutual funds (which excludes money market funds), with 10 vs eight. As well, three of the five Canadian equity funds on the list and Dynamic Global Dividend Value Fund, sponsored by Dynamic Mutual Funds Ltd. in Toronto, are dividend funds.
Dividend funds tend to weather market turmoil better than other equity funds. Investors are more likely to stick with investments that produce some returns through dividends than those that rely entirely on capital appreciation. In addition, dividend-paying stocks tend to be issued by large-cap companies, which have the financial resources and, frequently, the diversity of operations to help them weather economic storms.
Also on the list of best-sellers was Investors Real Property Fund, a specialty fund sponsored by Winnipeg-based Investors Group Inc. This fund offers further diversification through an asset class that isn’t correlated with stocks and bonds; it has done well investing directly in real estate rather than through real estate income trusts.
Nevertheless, there were two pure Canadian equity funds on the list, which shows that good funds still attract assets even when their category is out of favour. CI Harbour Fund, sponsored by CI Investments Inc. of Toronto, is one of those funds. The other is Dynamic Power Canadian Growth Fund.
The inclusion of the latter on the list is surprising, given that it invests in small- and mid-cap companies, which could negatively affect investor returns in a time of market turmoil and a global credit crunch. But the fund has an excellent track record, posting first-quartile returns each year since 2005 and second-quartile returns in 2003 and 2004.
Jordy Chilcott, Dynamic’s senior vice president and national sales manager, believes Rohit Sehgal, who manages the Dynamic fund, is among Canada’s top equity managers. He notes that Sehgal also manages Dynamic Power Balanced Fund, which was the sixth best-sellng fund in the list, with net sales of $184 million in the four months.
CI Harbour Growth & Income Fund, a Canadian balanced fund, topped the list of besting-selling funds, with $527 million in net sales during the 2007-08 RRSP season. That was almost $160 million more than Fidelity Investments Canada ULC-sponsored Fidelity Canadian Asset Allocation Fund’s $366.3 million and $278 million more than Fidelity Canadian Balanced Fund’s $249 million.
CI Harbour Growth & Income Fund has been among the top 25 selling funds for four years, but this is the first time it was the top seller.
@page_break@Fidelity Canadian Asset Allocation Fund is typical of the strong investment performance at Fidelity. In the year ended Dec. 31 2007, 85% of the company’s long-term assets under management were in funds with first- or second-quartile performance. Fidelity Canadian Balanced Fund and Fidelity Monthly Income Fund also made the top 25.
RBCAM sponsors six funds in the top 25, while Dynamic and Toronto-based Fidelity have three each. RBCAM had the best investment performance in 2007, with 87.5% of long-term AUM in funds with above-average returns. Dynamic was also strong, with 80.4%.
Most of the companies sponsoring funds that made the top 25 list had healthy net sales in this RRSP season — with one exception. (See page 1.) Quotential Balanced Growth Portfolio was on the top 25 list, even though its sponsor, Toronto-based Franklin Templeton Investments Corp., had substantial net redemptions.
Dennis Tew, Templeton’s chief financial officer, says that the Quotential program consists of eight diversified, tax-efficient portfolios. To make the program stronger, Templeton plans to add a real estate component to certain portfolios. Including Quotential Balanced Growth Portfolio, seven Quotential portfolios had net sales, for a combined total of $271 million. Only Quotential Diversified Income Portfolio was down, by $44 million.
That good funds can attract investors even when their sponsors are out of favour is underlined when looking at the top 50 best-sellers. Toronto-based AIM Funds Management Inc. , which had $1.7 billion in long-term net redemptions in the recent RRSP season, had one good seller: AIM Canadian Balanced Fund ranked No. 42, with $56 million in net sales. IE
Balanced funds top long-term sales
But a few equity funds make it on to the top 25 list
- By: Catherine Harris
- April 1, 2008 October 30, 2019
- 09:59