Canadian investors pulled billions of dollars from their mutual fund investments last month while falling share prices led to an $87.5-billion decline in total assets for the industry.
Mutual fund assets dropped by 4.4 per cent from March, 2022, falling to $1.914-trillion at the end of April, according to the latest data from the Investment Funds Institute of Canada.
The drop in assets was mostly owing to stormy markets as inflation and interest rates have begun to shake up the pandemic savings boom that saw billions of dollars move into the Canadian asset management industry. Stock markets surged throughout the pandemic after a slight dip in March, 2020. Now, markets have sharply turned with the S&P 500 falling for the seventh week in a row, the longest streak in 21 years.
On Tuesday, the S&P/TSX Composite Index closed at 20,286.20.
Last month, for the first time in almost 18 months, mutual funds also saw $4.9-billion in net redemptions, compared with $1.12-billion in net sales in March, 2022.
Net sales are the total amount of money a company brings in, accounting for any redemptions investors made to take out money from their investment funds.
The outflow of investment dollars is a drastic change from a year earlier that saw the first four months of 2021 bring in more than $51.2-billion in mutual fund sales. In comparison, sales in 2022 have steadily declined with just $13.2-billion in sales for the same period.
Balanced mutual funds – which invest in various asset classes, including both stocks and bonds – took the biggest hit, with $2.05-billion in redemptions, compared with $272-million in sales in March, 2022.
Bond funds continued their redemption streak with a third consecutive month of outflows. The tally for April recorded the highest outflows for bond funds this year with $1.75-billion in redemptions, compared with $503-million in redemptions in March.
Exchange traded funds have also felt the fury of markets, with assets dropping by $14.7-billion, or 4.5 per cent, to $310-billion, as of April 30. This is down from a record high in ETF total assets of $347-billion, at the end of December, 2021.
Despite unfavourable markets, ETFs continued to attract investors with $1-billion in sales for April, 2022. Equity ETFs brought in the highest sales of $533-million, followed by bond ETFs with $322-million in sales.
National Bank Financials’ director of ETF research, Daniel Straus, said in a note that the ETF equity flows were largely owing to institutional allocations in environmental, social and governance funds, which made up 70 per cent of the sales.
In contrast, Mr. Straus said, low volatility ETFs suffered a month of outflows, despite strong relative returns, as did preferred share ETFs, Canadian government bond ETFs and Canadian corporate bond ETFs, which all lost assets.
Crypto-asset ETFs – which collectively have about $5-billion in assets – suffered their largest single month of outflow since the asset class was introduced to Canada in February, 2021. About $338-million flowed out from bitcoin and ethereum ETFs in April, a figure that represents 5.5 per cent of the category’s starting assets.
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