Mutual Fund assets reach $1 trillion

par Alain Thériault | March 17 2014 08:45PM

Mutual fund assets reached $1.01 trillion as of 31 January 2014. The Investment Funds Institute of Canada (IFIC) reports that this milestone represents an increase of 16.1% over the previous 12 months.The first mutual fund was opened in Canada in 1932, with a goal of raising $50,000 in deposits. The product really picked up steam in the 1990s, when Canadians in traditional savings vehicles saw a decline in interest rates. Today, 117 companies offer about 2,946 funds in Canada. With a trillion dollars in assets, this product is the country’s number one investment vehicle.

In comparison, total segregated fund assets under management reached $214.4 billion dollars as of Dec. 31, 2012, according to the most recent statistics from the Canadian Life and Health Insurance Association (CLHIA). Relatively new in the market, exchange-traded funds held assets of $63.1 billion at the end of January, according to BMO's latest semi-annual report on the Canadian ETF market. The assets managed by mutual funds are more than five times those administered by the Canada Pension Plan (CPP). The mutual fund industry dominates even when the other nine largest pension funds in Canada are added to those of the CPP, for a total of $775 billion.

“The importance of this milestone is the increase in wealth it represents for the roughly 4.6 million Canadian households that choose to save for their financial goals through mutual funds,” comments IFIC president and CEO Joanne De Laurentiis. “Mutual funds have grown tenfold in value since 1990 and are a cornerstone of Canadians’ retirement savings. Of the $986 billion increase since 1990, approximately 54% was generated by net sales, while 46% is the increase in the total value (market effect) of those savings,” she adds.

IFIC emphasizes that financial advisors have played a key role in the success mutual funds have enjoyed since 1990. The lobby organization points out that mutual funds are available through a variety of distribution networks, but that the independent advisor channel remains the most popular among Canadians. “Research shows that advised households are twice as likely to save regularly for retirement across all age groups," notes Ms. De Laurentiis.

IFIC says that mutual fund growth is due to other factors as well, including innovative solutions and having wide variety of products designed by highly-trained professionals. However, accessibility is a key element. IFIC notes that an investor can start saving in a mutual fund by contributing as little as $25 a month. With that amount, one can gain access to financial markets in forty countries.