No stocks please, we’re Canadian.
While the rest of the world is reacquainting itself with equity funds, Canadian investors remain wary next to the perceived safety of bond funds and balanced funds.
On Tuesday, the Investment Funds Institute of Canada released its industry overview for December, and the results reinforce a trend that has defined the investment landscape ever since stock markets began to wobble with the recent financial crisis: investors aren’t interested in stocks.
According to IFIC, equity funds saw net redemptions of $1.2-billion in December, in line with the $1.4-billion of redemptions in November. Last year was particularly brutal for equity funds, with $14.1-billion in redemptions, worse than the $10.8-billion in redemptions in 2011.
By comparison, bonds are still attracting money, even as yields shrink and some observers worry about the impact of eventual rising interest rates. In December, bond funds saw net sales of $1.1-billion, below the net sales of $1.6-billion in November but still a hefty inflow. Balanced funds, which combine stocks and bonds, saw net sales of $1.9-billion in December, down from $2.5-billion in November.
The results follow an impressive rotation out of bonds and into stocks elsewhere. In the United States, for the week ended last Wednesday, net sales into equity funds surged to $18-billion (U.S.), the fourth biggest inflow since 2000. And internationally, a net $22-billion flowed into equity funds.
Why are Canadians so squeamish about stocks? Admittedly, the comparisons might not be entirely fair. The U.S. and international numbers are weekly data, rather than monthly, and they include exchange-traded funds.
Perhaps more to the point, Canadian stocks have been underperforming major U.S. indexes for the past two years, suggesting that Canadian investors might not feel as much regret over missing out on recent gains. Last year, the S&P 500 outgunned Canada’s S&P/TSX composite index by 9.4 percentage points; in 2011, the S&P 500 beat Canada’s index by 11.1 points.
For investors, past performance can be a strong motivator. In the case of Canada, though, past performance has done nothing for stocks.