* Asset managers waiting for increased risk appetite
* They see gains in U.S., global equities; Canada weaker
* Solution-based marketing takes investor focus off stocks
By Andrea Hopkins
TORONTO, Feb 10
Buoyed by rising global stock markets, Canadian asset managers
are increasingly certain that 2013 will be the year that
investors who were burned by the financial crisis make a return
to equity-linked products.
As mutual fund developers try to read investor sentiment in
Canada's traditionally heavy first-quarter sales period, money
continues to flow into funds marketed with the reassuring
"income" or "yield" tags that are favored by investors who lost
money in the 2008-09 stock market meltdown.
"We haven't seen a shift yet - it's very much balanced
products and fund-to-fund solutions that are still selling in
excess of 85 percent of what we've seen," said Neil Macdonald,
managing director of Scotia Asset Management, a unit of Bank of
"At some point there is going to be a massive shift to
equities again, and you just want to make sure that you're ready
According to research firm Investor Economics, 47.2 percent
of mutual fund assets at the end of 2012 were in fixed income or
balanced funds and 3.6 percent were in money market funds. Just
48.5 percent were in equity funds, far short of the 60-40
equity-bond split considered standard before the financial
As for the better part of the past four years, fixed income
funds have been biggest beneficiary of mutual fund inflows. In
2012, that asset category brought in C$29.5 billion ($29.5
billion) in net flows. Equity funds, meanwhile, had net
redemptions of C$6.5 billion. As a category, equity funds last
recorded positive inflows in 2007.
Investor anxiety about stock markets - and hard lessons
learned in 2008 - have forced asset managers to shift their
marketing focus to "solution-based" planning, whereby investors
set financial goals and their advisers pass those goals on to
asset managers who pick the best funds to meet the target.
That way, if a "yield" fund or "balanced" fund is shifted
towards equities, squeamish investors never need to know.
"If you're a moderate-risk client, you get a moderate-risk
solution," Macdonald said. "The sales process is designed in a
way that you have the right solution, and our job is to, on an
ongoing basis, make sure we are managing those portfolios
appropriately and taking the risk out of them when we should."
Sadiq Adatia, chief investment officer at Sun Life Global
Investments, a unit of Sun Life Financial Inc, is
taking a similar tack.
"Today's yield story may not be yesterday's yield story, and
there are many asset classes that can give you great yield, give
you exposure to all those different types of yield, and we will
adjust it when the yield potential is better," Adatia said of
Sun Life's new fund lineup, launched in January.
He too, sees appetite for equities increasing in 2013.
"The good news is I think people are relatively bullish,
advisers are relatively bullish," Adatia said. "That is probably
why we've had a good start to the year and I think that momentum
is going to continue on."
A survey of Canadian financial advisers for Sun Life found
that 70 percent of advisers are optimistic about the S&P 500
, 65 percent were bullish on the Dow Jones industrial
average, and 62 percent were optimistic about emerging
markets. Sentiment was less favorable towards Canada, with just
59 percent saying they believed the S&P/TSX would gain
ground this year.
"Equity markets are going to have a positive return, with
U.S. and emerging markets showing a high single-digit return in
2013. I actually think Canada may end the year in a negative
return, and the bond market will have a tough time staying above
water this year as well," Adatia predicted.
"So I think if you are an overall investor you want to be
overweight equities over bonds, but you want to focus on the
geographies like the U.S. and emerging markets."