Bond Funds Lost Out To Equity Funds In Canada During Q3: BMO

Bond Funds Lost Out To Equity Funds In Canada During Q3: BMO

After a lull in Q2, Canadian investors again resumed plowing money into equity mutual funds during Q3. Balanced funds too saw heavy inflows, though as expected, money continued to rotate out of bond funds, according to analysts John Reucassel and Jennifer Kao of BMO Capital Markets in their Quarterly Fund Flow Review for Q3 of 2013 of the Canadian mutual fund industry.

Equity markets a magnet for funds

Robust equity markets helped garner solid inflows in Q3 of $1.1B into equity funds at the cost of bond funds, which saw net redemptions of $2.2B. Balanced funds clocked net sales of $4.5B.

Exclusive: Third Point Expands Private Equity Business With New $300 Million Fund

Nestle Dan Loeb Daniel Loeb third point capital hedge fund manager activist investor poison pen activism Yahoo corporate governance famous investorsDan Loeb's Third Point recently completed the first close for TPVC, its new dedicated private growth-stage fund. The $300 million fund is part of Third Point's private investing strategy. At the end of February, Third Point managed $16.5 billion overall for clients around the world. New talent According to an investor update dated March 5th Read More

The inflows continued strongly into October, which reported $1.8B in long-term funds sales on a net basis.

The popularity of the fund types can be gauged from the net sales tabulation shown below:


Rising interest rates cast their shadow on fixed income funds, which were the worst selling long-term fund category in the quarter.

Banks the top vehicle for flow mobilization

Banks had the lion’s share of net sales of $2.7B, almost 43% of the industry’s long-term gross sales and 66% of long-term fund net sales in the quarter. Banks were able to take advantage of their branch network to grow their net sales. On the other hand, independent fund companies, which rely upon financial planners and investment advisors, saw a decline in sales.

Industry assets under management

As of September 2013, banks held assets of $374.2B, manufacturers (independent fund companies) $343.1B, Investors Group dedicated sales force $64.4B and life insurers held $43.5B.


Outlook for bond funds

“We expect the rotation out of bond funds and into non-Canadian balanced and equity funds to remain for the remainder of 2013 and into 2014. Assuming relatively stable markets, we expect a strong RRSP season in 2014,” say the analysts. They point out that recent hardening of interest rates have led to “headwinds” for bond funds.

No posts to display