Despite investor pivots, IFIC says 2023 saw some bright spots for funds

Assets for mutual funds and ETFs ended the year higher

Despite investor pivots, IFIC says 2023 saw some bright spots for funds
Steve Randall

Canadian investors continued to have some tough decisions to make on how to use their money in 2023, but despite the challenges this caused for investment funds, there were some positives.

A new report from the Investment Funds Institute of Canada (IFIC) offers data and analysis of Canadian mutual funds and ETFs during the last year, which saw assets grow despite net redemptions for mutuals.

“IFIC’s robust data collection and reporting allow us to better understand how economic factors and the investment funds industry interact,” said Andy Mitchell, IFIC’s President and CEO, who took over the role in 2023.

Mutual fund assets ended 2023 up 7% from the previous year to a total of $1.9 trillion, while ETFs gained 22% year-over-year to finish the year at $382 billion. Mutuals faced record net redemptions of $57.1 billion – the second consecutive year of net redemptions ($43.7 billion in 2022) while ETFs recorded net sales of $37.6 billion.

Among the bright spots were high interest funds with assets for the mutual funds segment totalling $14.8 billion and for the ETF segment $22.5 billion. These funds’ net sales accounted for 47% of all money market sales for mutuals and 83% of all money market funds for ETFs.

Responsible investment funds also had a good year with assets of $40 billion for mutuals and $16.3 billion for ETFs, and net sales of $538 million for mutuals and $4.8 billion for ETFs.

Alternative assets were also in demand with assets of $20.2 billion for mutual funds and $12.6 billion for ETFs, with net sales of $2.6 billion for mutuals and $2.4 billion for ETFs. Net sales improved from 2022 (both fund types saw $1.8 billion) but way below the super-sales in 2021 ($6 billion for mutuals, $8.3 billion for ETFs).

Overall, balanced funds accounted for the largest single share of mutual funds assets (47%) with equities in second place at 37%, while equities dominated ETF assets at 61% with bonds second at 25%.

Fund providers

IFIC’s Investment Funds Report 2023 also reveals that  money flowing into mutual funds was spread more thinly in 2023 as there were 120 mutual fund providers, up from 113 in 2022 and similar levels in the previous two years. There were fewer funds though last year (3,284) than in 2022 (3,408).

For ETFs, there were 41 providers (down from 42 in 2022) including 33 that also offer mutuals. The upward trend for ETF numbers continued, reaching 1,126 (up from 1,056 in 2022).  

Mitchell noted that 2023 was a year when Canadians were not always able to find spare cash for investing, especially given the risky market and economic landscape.   

“There are many reasons for changes in investor behaviour, but we know that mutual fund sales in 2023 were affected by market volatility, economic uncertainty and rising inflation and interest rates,” he said. “Many Canadians had to make tough financial decisions in order to put groceries on the table and pay the mortgage.”