Canadians take more than $1-billion out of funds in May

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Canadian investors withdrew an estimated $1.25-billion from mutual funds in May as global stock markets tumbled on concerns over the debt crisis faced by Greece and other euro-zone countries.

This is the second consecutive month of net outflows for the Canadian fund industry, nearly doubling the $670-million in April, and contrasting with net sales of $939-million a year ago, according to preliminary figures from the Investment Funds Institute of Canada (IFIC).

The stock market volatility triggered by the European debt crisis is sending investors to the sidelines, said Frank Hracs, chief economist at Toronto-based Credo Consulting. "It's a shock, and investors are taking pause to see how it is going to play out."

The S&P/TSX Composite Index fell 3.7 per cent last month, while the S&P 500 plunged 8.2 per cent.

The more profitable long-term stock and bond funds suffered from about $300-million in net outflows in last month - the first time since March, 2009.

And it was the first time that both long-term and money market funds saw net redemptions together since October, 2008, when the stock market collapsed amid a global financial crisis and credit crunch.

But IFIC's manager of statistics Dennis Yanchus said it is still too early to say whether May is the start of trend in net outflows because of the recent market volatility.

"We tend to see a falloff in May anyway depending on the year," he said. "We have to see in the coming months whether it is a trend or it's just a one off."

IFIC estimated that industry assets, which are also affected by the market value of funds, fell about 3.4 per cent to between $596.8-billion and $601.8-billion last month.

Among the Canadian publicly traded fund companies, DundeeWealth Inc., which sells the Dynamic Funds, took in $150-million in net sales in May. CI Financial Corp., whose sales figures are not included in the IFIC results because it is not a member, attracted $265-million in net inflows.

IGM Financial Inc., which includes Investors Group and Mackenzie Financial, suffered from $221-million in net outflows. AGF Management Ltd. saw $204.3-million in net redemptions.

The fund arm of Royal Bank of Canada, which includes RBC Asset Management Inc. and Phillips Hager & North Investment Management Ltd., suffered from redemptions of $699-million, but it was all in money market funds. Manulife Investments, the fund arm of Manulife Financial Corp., took in the most new money and attracted $201-million in net sales.

How the Top 12 Fund Companies Fared in May 2010