Mutual Fund

Mutual Fund

The history of Mutual Funds has been recorded and established in the late 1700’s with many, setbacks, market corrections and not without it’s scandals and complications is prepared to reinvent itself at the pace of the savvy investor and the quick and demanding growth of the Internet. In Canada the Canadian mutual fund industry was the fastest growing segment of the financial services sector since the 1990s and continues evolving to lead the financial services industry today. Assets have been increasing steadily from $25 billion in December 1980 to an outstanding amount of $704 billion AUM as at December 2010 the mutual fund market had grown 2800% including new investments and market volatility. Most mutual fund companies, investment fund companies and money management firms report to IFIC on a regular basis; however there are some fundco that do not report one of the larger and more prominent mutual fund organizations “CI Funds” has decided not to share or include their financial statements, data or monthly market reports openly with IFIC or in turn advisors and the general public without further statement. Mutual Fund Investors constantly push for better service and accountability; full, plain and true disclosure is the best route for all market participants toward a more efficient investment marketplace in the long run. Although Canada has a thriving and varied mutual fund market however with (management expense ratio) MER’s still on the high side when compared with American and International studies and surveys. There is a constant need for further industry improvement and encouragement to be a better and more efficient marketplace. The mutual fund industry was the crown jewel of most Canadian banks and financial institutions today even the grocery chain stores and hardware giants have entered into the financial market. Regardless of all the changes, mergers and acquisition and landscape, mutual funds have been around since 1774 and have had a lot of time and experience re-inventing itself to be a mainstay in the future. With proper planning and improved communication and better access to information and technology there is no doubt Mutual Funds will change and evolve in the future and always adapt to investors in a simplified and appealing manner. Time and energy has been long invested into the concept of pooled fund investing lending itself to be easier to manage, maintain and sell conceptually as a winning solution for the average that wants and needs to invest in a growing Canadian economy and in Canada’s capital markets.

For almost every year since 1990, the majority of exponential asset growth has been due to new sales of this investment product that has become increasingly popular. The share of assets held in foreign funds has also increased substantially over the past 10 years. In 1990 foreign funds accounted for 17 per cent of total assets; by 2007 they made up fully 40 per cent of fund assets. In 2001 9/11 had a significant negative impact on North American Markets, which has since recovered but only recently in 2008-2009. Cancellation of the 30% Maximum Foreign Contribution Rules were also responsible for this growing trend of Canadian’s wanting more diversification and also looking for better overall returns. There are no longer any foreign content restrictions on your RRSP investments. Foreign content restrictions for registered plans were eliminated in the 2005 Federal Budget.

There are 85 mutual fund and investment management companies operating in Canada. The industry is moderately concentrated, with the top 10 companies accounting for 77 per cent of all assets. Bank Funds manufactured by Canada’s biggest banks account for more than 35% of the entire wealth of the 690 billion in the Mutual Fund Market. The industry also includes 140 dealer firms involved in the sale of mutual funds. In total, the industry employs about 100,000 mutual fund representatives, advisors and stockbrokers, supporting and seasonal staff may include another 30,000 financial professionals that provide mutual fund service in one way or the other. The service and support market has diminished considerably of the years because of more and more industry consolidation; it will take less manpower to service a growing number of account holders and assets under administration. The main types of mutual funds are money market funds, bond funds, equity funds, dividend funds, mortgage funds, real estate funds and specialty and alternative funds.

In 2010 there are currently 100 investment fund companies with their 1800 funds in 2006 growing to 4000 total independent mutual funds available in Canada representing over 50 million unit

holder accounts. According to the CIFSC there are 10 Asset Classes and more than 53 mutual fund categories not including bank funds, segregated funds, labour-sponsored funds, hedge funds, closed-end funds, pooled funds, trust funds, off-shore funds and exchange traded funds.

The industry can generally be divided into the manufacturers of funds and the distributors, although the banks, credit unions and caisses populaire are involved in both sides of the industry. The Advisor Channel is more highly coveted than at any other time in history, the industry often forgets that all financial products are sold, there is a refreshing trend by market participants to recognize and respect independent financial advisors for there ability attract and retain important long-term financial relationships. Advisors partner with more affluent clients that prefer overall financial advice rather than the standard, apparent and dismal approach of mass marketing by the big banks and large financial institutions. A Mutual Fund Company that is involved solely in the manufacture of mutual funds tend to distribute their funds through mutual fund representatives, investment advisors, financial planners, mutual fund dealers and life insurance agents, while the banks, credit unions and their Quebec counter part the caisses populaire distribute their fund products through their retail branches as well as via independent advisors and brokers.

Mutual Fund Companies, The Advisors Channel and other distributors obtain revenue from three main categories of fees: management fees (to pay for the management of the fund), sales fees (to pay for buying and selling the fund units) and special fees (for specific administrative costs). The mutual fund industry is governed by provincial and territorial legislation regulating the underwriting, distribution and sale of securities. There is also extensive self-regulation by the Investment Dealers Association of Canada, the Mutual Fund Dealers Association of Canada and the Canadian stock exchanges including the fast moving and innovative TMX with it’s full line-up of exchange-traded funds.

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Posted by on Apr 28 2011. Filed under CANADIAN MUTUAL FUNDS, CAREER, DEALERS, E-T-F's, ECONOMIC OUTLOOK, EDUCATION, EVENTS, INTERVIEWS, M & A, MANAGERS, Mutual Fund Advisors, MUTUAL FUND SHOW, NEW FUNDS, REPORTS, RESEARCH, RRSP, SALES, SHAREHOLDER, SOFTWARE, U.S. FUNDS, WORLD FUNDS. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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