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Canadian long-term fund sales pass CAD600m mark

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Canadian long-term fund sales were CAD646.4m in April, up from net redemptions of CAD412.8m in March and CAD29.4m in net redemptions in April 2008, according to the Investment Funds Ins

Canadian long-term fund sales were CAD646.4m in April, up from net redemptions of CAD412.8m in March and CAD29.4m in net redemptions in April 2008, according to the Investment Funds Institute of Canada.

The last time long-term fund sales were over the CAD600m mark was in February 2008.

Long-term fund assets have increased by CAD20.7bn, or 4.9 per cent, since the end of March and CAD24.4bn, or 1.9 per cent per month, since the end of January. Long-term fund asset growth was due almost entirely to market effect.

Fund sales across most asset classes were stronger in April than in March – the last month of RRSP season. Asset classes that had net redemptions in March saw those redemptions slow in April. Asset classes that had net sales in March saw sales strengthen in April. One notable exception to this was the money market fund asset class. Money market fund sales were -276.1 million in April, down from CAD932.5m in March and CAD486.9m in April 2008.

Taken together, the strengthening of sales in the long-term fund asset classes coupled with money market fund net redemptions seen in April likely signals that Canadian investors have begun to move off the sidelines either because they perceive that markets have passed bottom and are starting to strengthen or because the effects of falling interest rates on the returns of more conservative investments have led them to search out higher yielding investments, according to the IFIC.

The Canadian short term fixed income fund category had the highest net sales in April at CAD401.6m. This was followed by the high yield fixed income fund category (CAD315.3m) and the Canadian neutral balanced fund category (CAD132.3m).

Though money market fund sales were negative overall, US money market fund sales were positive as investors took advantage of the appreciation of the Canadian dollar vis-à-vis the US dollar in April. US money market fund sales totalled CAD122m for the month.

At the other end of the spectrum, Canadian money market funds had the highest net redemptions in April at -CAD306.3m. This compared with CAD1.26bn in March and CAD305.4m at this point last year.

Pat Dunwoody, vice president, member services and communications, says: "The final data confirms what we saw in our initial forecast, investors are moving back into long-term funds both through new fund sales and through portfolio rebalancing.

"Long-term fund assets under management increased substantially as well, after growing 4.8 per cent in March, long-term fund assets increased by another 4.9 per cent in April – a CAD40.3bn increase over the last two months."

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