Docstoc

Canada-US_Review

Document Sample
Canada-US_Review Powered By Docstoc
					  Canada/U.S. Review

     An IFIC Review of Mutual
Fund Statistics in Canada and the U.S.
              August 2005
         Prepared by Erwin Go, Manager, Statistics
Highlights in this review include:
   Between 1994-2004, Balanced funds were the No. 1 choice for Canadians, while U.S.
   investors preferred Money Market funds
   The Canadian mutual fund industry has a greater proportion of its assets in long-term
   funds, while the U.S. has a greater proportion in short-term funds
   Annual growth in assets in the Canadian mutual fund industry surpassed that of the U.S.
   especially last year
   Equities are back in favour for U.S. investors, but not so much for Canadian investors
   The U.S. continues to hold the lion’s share of the world’s mutual fund market, but this
   has been dropping since 1998



Note*: All U.S. mutual fund data provided by Investment Company Institute (www.ici.org)
                                                    Asset Growth
                           Annual Asset Growth

50%
40%
30%                                                                              Annual growth in assets in the Canadian mutual
20%                                                                   Canada     fund industry was fairly consistent with growth in
10%                                                                   US         the U.S. within the last ten years. This consistency
 0%                                                                              in growth can likely be attributed to the similarity
       1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
-10%
                                                                                 in financial markets for both countries and a
-20%
                                                                                 significant amount of investment into U.S. and
                                                                                 International Equity Funds by Canadian investors
                                                                                 (about 9%).
                  Average Compound Annual Growth of Assets*


20%
                                                                                 Canada fared slightly better than the U.S. when
                                                                                 comparing compound annual growth in fund assets
15%
                                                                       Canada    over the period, outperforming them in the one-,
10%                                                                              three-, five- and 10-year ranges.
                                                                       U.S.
5%
0%
         1-year           3-year        5-year         10-year


                                   *Figures as of the end of December 31, 2004
               Breakdown of Fund Assets
The make up of Canadian mutual fund assets                             Canadian Fund Assets
differs slightly from U.S. fund assets. Sales
of Money Market funds are more predominant        100%                 15.8 %          15.7%
                                                           15.6 %                                   16 .7%      17.0 %
in the U.S. than Canada, so it’s not surprising   80%                                                                             18 .2 %


that Money Market funds make up a much            60%     56 .9 %    6 0 .1%       55.2 %           50 .1%     4 9 .8 %       4 8 .0 %
                                                  40%
larger portion of total U.S. fund assets.                                              7.8 %         9 .3 %      10 .3 %
                                                  20%      9 .1%        7.5%
                                                                                   14 .8 %          15.4 %
                                                                                                                                  11.3 %
                                                          11.6 %      10 .5%                                    12 .4 %       10 .2 %
                                                   0%
In Canada, Balanced funds represent a                    1999        2000         2001            2002         2003          2004
significant portion of assets, increasing their          Money Market           Bond       Equity      Balanced           Other
share in the past couple years as their
popularity rose. Balanced fund sales
represented almost half of total sales in
Canada over the past two years.                                          U.S. Fund Assets

                                                  100%
Equity funds continue to represent the            80%                              4 9 .0 %         4 1.7%
                                                                                                                4 9 .7%
                                                          59 . 0 %    56 . 9 %                                                 54 .1%
majority of assets in both countries. While       60%
                                                                                                     17. 7%
                                                                                       13 . 3 %
Balanced funds have gained favour in the eyes     40%      11. 8 %     11. 6 %
                                                                                                                 16 .8 %
                                                                                                                                  15. 9 %

                                                  20%                              3 2 .8 %         3 5.6 %
of Canadian investors, Equity funds seem to               2 3 .6 %    2 6 . 5%                                  2 7.7%        2 3 .6 %

                                                   0%
be top of mind in the U.S., where their market           1999        2000         2001             2002        2003          2004
share rose for the second consecutive year.                 Money Market           Bond           Equity      Balanced
                                                                                 Net Sales
                                 Net Sales of Canadian Mutual Funds

                $80,000
                $60,000
$CDN Millions




                                                                                                        The trend lines for net sales show that sales
                $40,000
                                                                                                        peaked in each country at different times. Net
                $20,000

                    $-
                                                                                                        sales for the Canadian mutual fund industry
                $(20,000)
                          1995   1996     1997     1998    1999    2000   2001   2002    2003    2004   were the strongest from 1996-1998, while the
                                                                                                        U.S. industry had its strongest sales from 1998-
                                           Money Market Funds       Long-Term Funds
                                                                                                        2001. Both countries showed similar trends
                                                                                                        during the bear market periods between 2002-
                                                                                                        2004.

                                  Net Sales of U.S. Mutual Funds                                        While the strength of the U.S. industry’s sales
                $1,000,000
                                                                                                        come from both Money Market and long-term
                 $800,000                                                                               funds during this period, Canada’s strength,
$CDN Millions




                 $600,000
                 $400,000
                                                                                                        with the exception of 2001, primarily came
                  $200,000                                                                              from sales of long-term funds.
                      $-
                 $(200,000)1995    1996     1997    1998    1999   2000   2001   2002   2003    2004
                 $(400,000)

                                           Money Market Funds        Long-Term Funds
                                Allocation of Sales
 Equity funds were the choice of mutual fund investments for both Canadian and U.S. investors
 back in 2000.

 However, while Equity funds are back in favour for U.S. investors, Canadians have shied away
 from these investments. Instead, Canadians put their monies into more conservative funds such as
 Balanced, Bond, and Dividend & Income funds.




       Allocation of Canada's Net Sales by Fund Type                   Allocation of U.S. Net Sales by Fund Type

100%                                                            100%
 80%                                                             80%
60%                                                             60%
40%                                                             40%
 20%                                                             20%
  0%                                                              0%
-20%                                                            -20%
            2000                 2002                   2004              2000                 2002                   2004
-40%                                                            -40%

              Balanced   Bond   Equity   Money Market   Other                    Balanced   Bond   Equity   Money Market
                   Redemption Rates
For many years, redemption rates for long-term mutual funds in Canada were consistently
lower than their U.S. counterparts possibly indicating that Canadian investors hold their mutual
funds for the long term.



                      Redemption Rates of Long-Term Funds

      50%

      40%

      30%                                                                     U.S.
      20%                                                                     Canada

      10%

       0%
               2000       2001       2002       2003       2004
  International Mutual Fund Assets
Net assets for International mutual funds
totalled US$16.1 trillion as of December 31,
2004, up 14.3% from 2003. Canada’s market                          World Mutual Fund Market Share*
                                                                                                 Remaining Americas
share increased for the second consecutive year                                              Africa
                                                                                                       1.69%

to 2.58%, the highest Canada’s market share has                         Asia & Pacific
                                                                           10.45%
                                                                                             0.34%                    Canada
                                                                                                                       2.58%

been since 1997. The market share for the U.S.
has steadily declined since 1998, to 50.5% from
                                                                         Europe
64.2%. Much of the market share decline in the                           34.48%                                                 U.S.
                                                                                                                               50.47%
U.S. and the rise in Canada can be attributed to
the international decline in the U.S. dollar.
Over the past two years, the average compound                                            *Figures as of the end of December 31, 2004
return for the Canadian currency against the
U.S. dollar was 14.6%.


          Canadian Mutual Fund World Market Share                       U.S. Mutual Fund World Market Share

  3.00%                                                    80%
  2.50%                                                    60%
  2.00%
  1.50%                                                    40%
  1.00%
                                                           20%
  0.50%
  0.00%                                                    0%
          1996     1998      2000      2002         2004         1996               1998              2000              2002            2004
                           Number of Funds
The U.S. mutual fund industry only has about four times more funds than Canada, despite a
market size that is 20 times greater than Canada. This could indicate the diverse choice of funds
Canadian investors have compared to their U.S. counterparts.




                                    Canada                                               U.S.
                                             Avg Assets per Fund                                Avg Assets per Fund
    Fund Type    No. of Funds   % of Total    in ($CDN Millions)    No. of Funds   % of Total    in ($CDN Millions)
     Balanced            270         14%                    334.6           510          6%                  1,140.6
         Bond            197         10%                    285.7         2,041         25%                    759.9
        Equity         1,239         65%                    192.9         4,550         57%                  1,158.2
  Money Market           110          6%                    458.9           943         12%                  2,438.7
         Other            99          5%                    618.8            n/a          n/a                    n/a
         Total         1,915        100%                    259.7         8,044        100%                  1,211.4

				
DOCUMENT INFO