It's fitting that the Canadian mutual-fund industry's monthly sales data were delayed by Monday's blackout in downtown Toronto. Because when the numbers finally hit the street Tuesday, they showed some flickering lights and a lack of power.
The Investment Funds Institute of Canada's preliminary June sales report showed that the industry suffered net redemptions estimated at between $20.9-million and $520.9-million in the month.
(IFIC's preliminary estimate always employs a $500-million range, giving it plenty of wiggle room for adjustments before the final data are released mid-month, but the mid-point of the range - in this case, $270.9-million - is generally a pretty good rough estimate for where the final total will land.)
The numbers point to the third straight month in which Canadian mutual-fund sales have been in the negative - reversing a significant chunk of the gains the industry enjoyed during the lead-up to the March tax deadline for contributions to registered retirement savings plans. Indeed, ever since RRSP-deadline-related sales left the equation, IFIC's monthly data have been moving backward.
As IFIC vice-president Pat Dunwoody said in the organization's press release accompanying the data, volatile and uncertain markets certainly haven't been doing fund sales any favours. The continued outflow of funds undoubtedly reflects investors' nervousness about growing financial-market risks, economic prospects and the sustainability of last year's investment gains.
Still, the chief source of June's outflows does offer a silver lining.
The early data indicate that net redemptions in money-market funds - essentially, short-term cash holdings of mutual-fund investors - topped $1.2-billion in the month. Meanwhile, sales of all classes of long-term funds were about $950-million in the black.
The implication is that despite shaky markets, investors continued to pull money out of cash and put it to work in longer-term funds, be they equity, bonds or balanced funds. Money-market redemptions are running at nearly $11-billion since the start of the year.
These numbers put the current scare over sovereign-debt-default risks in stark contract to the past scare over mortgage-backed-debt-default risks in 2008 and early 2009, which was characterized by a flood of investors out of long-term funds and into money markets. It would appear that investors are cautious now, but far from out-and-out scared to invest their money.
Still, it's a bit worrisome that even with the continued return of parked cash into long-term funds, more money has been leaving Canadian mutual funds than going into them.
And while market watchers had been hoping that all the money parked in cash during the credit crisis would be the fuel to sustain the stock markets this year, the evidence suggests that hasn't quite been the case. Canadian domestic equity funds have suffered net redemptions in nine of the past 11 months (data at the fund-category level isn't yet available for June), while the bulk of the re-invested cash appears to have ended up in safer, lower-equity-content balanced funds.
It's hardly a disastrous situation for Canadian stocks, but by the same token, it's far from bullish. After all, a stalled inflow of new money has a funny way of stalling growth and returns, too.
David Parkinson