Canadian mutual fund companies saw more than $14-billion in net redemptions in March as the novel coronavirus clobbered global equity markets, while exchange-traded funds recorded positive sales growth of $3-billion.
Mutual-fund assets totalled $1.45-trillion at the end of March, down by almost $160-billion or 10 per cent compared with the prior month, according to data released on Wednesday by the the Investment Funds Institute of Canada (IFIC).
Much of the decline was because of falling markets, which drove down the value of assets in the funds. However, IFIC’s March data show that the majority of the $14.1-billion in redemptions came from investors cashing out of long-term mutual funds, including balanced, equity and bond funds.
Balanced funds saw $11-billion in net redemptions, wiping out the strong sales momentum in the first two months of the year, when they recorded $2.5-billion and $3.5-billion in net sales during January and February, respectively.
Equity funds had $702-million in net redemptions in March, while bond funds saw $6.7-billion in net redemptions. The losses were somewhat offset by net gains in two asset classes.
In March, money market funds gained $4.1 billion in sales, and specialty funds sold $181-million.
Canadian exchange-traded fund (ETF) assets totalled $190.3-billion at the end of March, a $20-billion drop from the month prior.
Despite seeing total assets decline by 9.5 per cent amid the market turmoil, ETFs posted overall net new sales of $3-billion in March, the majority in long-term funds.
Equity ETFs brought in the most new money, with $4.1-billion in net sales, while balanced funds saw $124-million in sales. Money market ETFs finished the month with $31-million in net sales.
Both bond ETFs and specialty ETFs saw net redemptions of $1.2-billion and $139-million, respectively. Bond ETFs reported sales of $2.8-billion the month prior, while specialty ETFs saw $43-million in net sales for February.
According to IFIC, ETFs hold a 13-per-cent market share of all assets in investment funds in Canada. While ETFs continue to grow, the far larger value of assets held in mutual funds means that when investors are feeling pessimistic, mutual funds are more likely to “feel the brunt of mass selling,” says Daniel Straus, vice-president of product research at National Bank of Canada Financial Markets.
“When investors find themselves sitting on freshly liberated cash, ETFs are a natural destination in this new era of cost-consciousness,” Mr. Straus said. “I would expect this trend to continue in every sell-off environment until ETFs and mutual funds find a certain equilibrium in their relative market share.”
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Clare O’Hara