The market whirlwind of the past three months continued unabated as we went to press with the November issue of Insight. We pause to reflect on the effect the tumultuous market conditions and deteriorating economic outlook have already exerted on the fund industry’s size and flow activity. Beyond the obvious and immediate impact on asset base valuations, we consider how the current environment is influencing investors’ (and their advisors’) purchase and redemption behaviour. Our goal is two fold. First, we want to provide historical context to this year’s asset and flow patterns. Our secondary aim is to contemplate the future impact of the current market downturn on the mutual fund product’s position as an investment vehicle of choice for the retirement nest-eggs of many Canadian households.
As always, our analysis is rooted in facts and historical perspective. In addition to charting the industry’s progress and establishing factual benchmarks for evaluating its importance to the Household Balance Sheet, we pinpoint factors contributing to the stability—or volatility—of net inflows and put forward ideas on how their influence is likely to evolve in the years to come.
Our investigation begins with a look at the industry’s size. We then shift to flow and redemption patterns and document the growing importance of pre-assembled advice products. Pre-packaged solutions in turn lead us to consider the industry’s diversification and its risk profile. The rise in the significance of advice channels is examined next. We conclude with a discussion of the “money on the sidelines” opportunity. The November 2008 issue of Insight is now available for subscriber download.