There is a silver lining to the fund industry's tumbling net assets in October after a string of monthly increases, says GMP Securities analyst Stephen Boland.
Net assets closed the month at $632.3-billion – 10.8 per cent above the end of October, 2008, and 20.8 per cent above the end of February, 2009, Mr. Boland noted in a report to clients on Wednesday. “Though still roughly $85-billion below the May 2008 high of $719.3-billion, the recovery has been robust.”
As well, cash continues to flow out of money market funds into higher-margin long-term stock and bond funds, Mr. Boland wrote. Money market funds suffered from $14.8-billion in net redemptions, while net sales of long-term funds have risen to $12.5-billion over the past seven months, he wrote.
“We believe that this trend could continue over the next few months and should be positive for the asset managers in our coverage universe due to higher relative management fees in long-term funds."
Mr. Boland's figures include CI Financial Corp. which is not a member of the Investment Funds Institute of Canada (IFIC), the industry group.
The analyst has “buy” ratings on AGF Management Ltd. with a one-year target of $18.25 a share; CI Financial with a target of $23.50; IGM Financial Inc. with a target of $45, and DundeeWealth Inc. with a target of $15.
The analyst, however, is maintaining his “reduce” on Sprott Inc. with a target of $3.75 a share. “As the year comes to a close, we believe that performance fees will be modest. Sprott’s largest hedge funds continue to post negative year-to-date returns despite performing well in October.”
Using data from IFIC, which excludes the Sprott funds, the report lists the top best-selling long-term funds in October.
They included NEI Canadian Bond, TD Mortgage, Fidelity Canadian Asset Allocation, TD Short-Term Bond, Phillips, Hager & North Short Term Bond & Mortgage, Fidelity Canadian Short Term Bond, RBC Canadian Dividend, Dynamic Strategic Yield, MDPIM Canadian Bond and Fidelity Canadian Balanced.
Funds with the most net redemptions included Phillips, Hager & North Total Return Bond, Brandes Global Equity, Trimark Select Growth, Phillips, Hager & North Bond, Trimark Income Growth, Mutual Beacon, Mackenzie Cundill Value, Mackenzie Ivy Canadian, Mackenzie Ivy Growth& Income and Templeton Growth.
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