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Canadians flock to long-term funds Add to ...

Canadians stashed about $560-million into mutual funds in January as RRSP season kicked into high gear.

While the net sales were sharply lower than $1.2-billion a year ago, the trend was upbeat for the Canadian industry because it was all in higher-margin, long-term funds, according to preliminary figures released Tuesday by the Investment Funds Institute of Canada (IFIC).

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There was about $3.2-billion in long-term fund net sales and about $2.6-billion in money market net redemptions. Long-term funds include stock, bond and balanced funds.

"The investor sentiment is cautious, but positive based on what we are seeing in sales," said Dennis Yanchus, IFIC's manager of statistics.

Mr. Yanchus expects investors are continuing to gravitate to more conservative balanced and fund-of-fund offerings as opposed to all-equity funds.

January was the third consecutive month of net sales for the industry, and it came despite a correction in the stock markets. Last month, the S&P/TSX Composite Index tumbled 5.6 per cent, while the S&P 500 Index fell 3.7 per cent.

In contrast, all the net sales in January, 2009, were in money market funds. It was a popular vehicle for parking cash as stock markets continued to crater early last year.

Frank Hracs, chief economist at Credo Consulting, described this January's long-term net sales as running at about 80 per cent of the pace in January, 2007, "which was part of the best RRSP season in ten years.

"This time around there continues to be a huge ongoing outflow from money market funds, which highlights the improved investor psychology over the past year or so," Mr. Hracs said.

Dynamic Mutual Funds, which is owned by DundeeWealth Inc., was the leader, attracting $626-million in net inflows. Its long-term fund net sales also included $300-million related to the roll-over of assets into mutual funds from flow-through limited partnerships sold by the Goodman & Co. Investment Counsel unit.

Fidelity Investments Canada LLC attracted $263-million in net sales, while Scotia Securities Inc. - the fund arm of Bank of Nova Scotia - took in $192-million.

The IFIC figures exclude CI Financial Corp., which has not been supplying data to the industry group since December, 2008. IFIC has adjusted its past figures to reflect the departure of the fund company.

CI Financial attracted $100-million in net sales, but that included both mutual funds and segregated funds.

AGF Management Ltd., however, experienced net outflows, which nearly doubled to $121-million in January from a year earlier.

Last month, Christine Hughes, an award-winning manager who ran the AGF Canadian Balanced Fund, unexpectedly left the firm for personal reasons. Analysts have said that her fund was AGF's best seller in 2009.

IGM Financial Inc., which includes Investors Group and Mackenzie Financial, suffered from $116-million in net redemptions.

RBC, which includes RBC Asset Management Inc. and Phillips Hager & North Ltd., suffered from $486-million in net outflows. That was all in money market funds yielding low returns.

The bleeding also continued at Invesco Trimark Ltd. It posted $366-million in net redemptions despite launching new mutual funds that invest in some of the PowerShares exchange-traded funds (ETFs) trading in the United States.

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