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| MUTUAL FUNDS MONTHLY: MAY 2009 | | | The Canadian fund industry had a fairly unremarkable April from a net sales standpoint as $370 million made its way though the doors last month. That’s off 34% versus the same month from a year ago and it is 29% lower than March 2009’s tally. What was remarkable last month, however, was the fact that net money market fund flows were negative. Outside of August and September of last year, when the very integrity of money market funds was being questioned, the category hasn’t seen a month of net outflows since mid-2007. Money market funds have really been THE sales story over the past 18 months. Looking at the money market fund situation more granularly, the big-daddy of Canadian money market funds – RBC’s Premium Money Market offering – saw another $639 million in new capital come its way in April. That figure is nearly 50% larger than the aggregate flows into the industry’s next ten best selling money market funds last month. The RBC fund’s recent inflow history skews the money market group’s sales stats so dramatically that it would almost make sense to classify the product as its own unique category. A peek at the money market funds that experienced net redemptions presents a more telling story in our view. There were nearly 20 money market products with net redemptions of at least $20 million last month. That’s uncommonly broad-based and in our opinion it appears as though investors have reached some sort of money market fund fatigue. Whether this is temporary phenomenon or the start of a trend, it is clear that most investors who began moving into money market funds at some point over the past 18 months are finally tiring of earning virtually no yield in an environment where riskier assets are beginning to thrive. We are not going out on a limb when we say that continued equity market strength should bring about further reallocations from money market assets to riskier assets and very soon we could once again see monthly equity fund flows that are in the black. And what happens with anomalous RBC’s $18 billion Premium Money Market fund is anybody’s guess. Please click on the link below to open the full multi-page report and printable version: http://research.dundeesecurities.com/Research/Funds052009.pdf
(Pertinent and general disclosures attached.) This report and others can be found on the MAST Research Website. Login to MAST and select 'Investments' from the top menu or select Research from the Client Solutions links. http://www.dundeewealth.com/action/DisplayPublicHomePage PLEASE BE ADVISED THAT TRADING INSTRUCTIONS SHOULD NOT BE COMMUNICATED VIA E-MAIL, AND IF RECEIVED WILL NOT BE ACTED UPON.
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| | PRIVATE CLIENT INDUSTRY OVERVIEW | | | | January was the first month of positive net sales for the fund industry since August as $1.2 billion made its way in. Unfortunately, money market funds remained the go-to category, leaving long term fund flows nearly $200 million in the red. Over $22 billion has flowed into money market funds since September 2007. The king of the money market empire, RBC Premium Market, was by far the top selling fund for the month with $1.2 billion in net flows. The fund is also the biggest offering in the Canadian mutual fund universe with nearly $16 billion in assets. Although the long term fund flow figure was negative, it was markedly better than what was posted in any of the previous four months. RRSP season doesn’t really get rolling until mid-February begins, and although signs are pointing to a weaker than normal season this year, we think there could be enough investor momentum to push long term flows into the black for the fist time since the middle of last year. That said, there remains little incentive for retail investors to add more risk to their portfolios at this point. There is no performance to chase, and there is no hot story (outside of perhaps high yield debt). We suspect money market flows will continue to be strong for many months to come and long term fund flows should return to negative territory once RRSP season is finished. That said, we suggest investors take a good look at the investment savings accounts.Most fund categories experienced net redemptions in January. A noteworthy bright spot was the fixed income category, which saw $319 million in new money come through the doors. That category was powered by the $297 million that flowed into high yield bond funds. That tally was a record for high yield bond funds and it’s no surprise given the number of phone calls we are receiving about the subject. Wholesalers & investment t.v. guru's have clearly been talking about high yield. Speaking anecdotally, any time we experience a measurable increase in the number of inquiries we receive about a particular investment, a red flag goes up and our natural instinct is to begin developing serious concerns about the short term outlook for the investment in question. Call us contrarians at heart. We are not quite there yet with high yield bond products, but we should note that the last time we experienced a notable upswing in inquiries about something started about a year ago. The topic then was energy and mortgage back securities. | | |
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