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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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