Canadian investors stashed nearly $170-million of new cash into mutual funds in December amid renewed confidence in stock markets.
This was the second consecutive month of net sales, and contrasts with the $749-million in net outflows a year ago amid a market collapse, according to preliminary estimates released Tuesday by the Investment Funds Institute of Canada (IFIC).
"Investors are much more comfortable in investing," said Frank Hracs, chief economist of Toronto-based Credo Consulting. "All the fear happened last year."
But the real story is strength in net sales of long-term funds at around $2.3-billion in December, which should boost the fourth-quarter number for 2009 to about $6.5-billion, he said. "That is likely the best since 1997.
"There was aversion to fund demand in the second half of 2008, and so there is a lot of catch-up demand happening."
Long-term funds, which invest in stocks and bonds, are a key metric in the mutual fund industry because these investments charge higher management fees than short-term money market funds.
The trend should bode well for the coming registered retirement savings plan (RRSP) season with long-term fund net sales in the first quarter possibly matching the $14-billion in the same period in 2007, he said.
"Its looks like we are on course for a very solid first quarter despite what happened last year. The psychology is completely reversed…Investors have gotten back in very aggressively through the last three quarters."
North American stock markets last month extended their most recent rally that began in November. The S&P/TSX composite climbed 2.6 per cent, while the S&P 500 composite rose 1.8 per cent.
IFIC statistics analyst Nuvi Purmasir said that net sales of mutual funds last month were lower than the $439-million in November, but that was largely due to the holiday season, when fewer Canadians are thinking about investing.
Key to the industry is that the fact that assets rose by $87.4-billion during 2009 to $594.4-billion by year end, he added.
Scotia Securities Inc. was the leader in net sales last month, attracting $421-million, followed by Fidelity Investments Canada with $313-million.
Dynamic Mutual Funds, a unit of DundeeWealth Inc., brought in $275-million. Among other publicly traded fund companies, IGM Financial Inc., which includes Investors Group and Mackenzie Financial Corp., reported net redemptions of $19-million. AGF Management Inc. also saw net redemptions of $103-million.
CI Financial Corp., which is not a member of IFIC, reported net sales of $100-million in both mutual and segregated funds. Invesco Trimark Ltd., a unit of U.S.-based Invesco Ltd., suffered from $390-million in net outflows.
RBC, which includes RBC Asset Management Inc. and Phillips Hager & North Ltd., suffered from $719-million in net redemptions, but it was all in money market funds.
That figure stems from $1.2-billion in net redemptions from money market funds, and $444-million in net sales of long term funds.
"Investors appear to be moving off the sidelines, and taking a 'back-to-basics' approach as they redeploy their money into balanced and risk-adjusted investments," said Doug Coulter, president of RBC Asset Management.