Canadian mutual funds reported strong flows

Canadian-based mutual funds enjoyed strong flows thanks to rising equity markets. Total assets managed by mutual funds rose 21% over the last 12 months ending in June 2014. Total long term sales, which exclude money market funds were $4.8 billion, which presents an increase of $2.8 billion relative to June 2013. Equity funds experienced outflows on June 2014, led by U.S. equity funds while Canadian equity, global and international equity and sector funds gained. Balanced funds led sales last month with $3.8 billion and bond funds saw inflows of $1.25 billion. Global balanced funds comprised 72% of balanced funds sales. Investors have become more interested in bond funds with the recent decline of long term rates. According to Jennifer Kao, analyst at BMO, institutional rebalancing affected equity fund flows as managers sold U.S. equity funds and bought bond funds. Without rebalancing, equity flows would have been positive and bond funds sales would not have been as strong.

Mutual Funds Fund Flows

Mutual Funds Fund Flows

More ETF investment options drove asset growth

BMO believes that exchange traded funds (ETFs) are seen as a substitute for mutual funds. Its analysis found that ETF assets rose 18% year over year as of June 30, 2014. The number of ETFs available rose 9% since June 2013 reaching 301 last month. More ETFs have been developed within asset classes already exposed to such vehicles and within asset categories that did not have an ETF choice available. However, Kao indicates that ETFs have a small market share. ETF assets represent 6.4% of total mutual fund assets.

Mutual Funds Fund Flows

U.S. fund sales as leading indicator for Canadian fund sales

U.S. mutual fund market has acted as a leading indicator to the Canadian mutual fund market, according to BMO. U.S. based mutual funds, like their Canadian peers, experienced strength in bond funds sales. U.S. equity mutual funds attracted inflows of $32 billion last month. U.S. mutual fund flows improved from net outflows to net inflows relative to June 2013. Positive market performance and higher fund inflows bolstered assets under management.

Mutual Funds Fund Flows