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Billions of dollars keep fleeing Canadian mutual funds

It's the eighth month in a row that Canadian mutual funds have seen net redemptions

Silver pen lie down at financial statistic document at empty working table closeup
The latest IFIC data show Canadian mutual funds saw a net redemption of $8.7 billion in November. (megaflopp via Getty Images)

Canadian mutual funds suffered yet another month of large net outflows in November.

The latest data from the Investment Funds Institute of Canada (IFIC) show $8.7 billion was pulled overall from Canadian mutual funds, marking the eighth month in a row of net redemptions.

Investors pulled money out of balanced, equity, bond and specialty funds, while the traditionally safer money market funds saw a modest net inflow of $551 million.

"2022 has been a challenging year for investors both in terms of volatility and asset class returns. Both stock and bond returns have been negative in 2022. Investors have reacted to this environment by pulling away from markets with their concerns potentially being for continued volatility and poor returns into the future," Anish Chopra, managing director at Portfolio Management Corporation, told Yahoo Finance Canada in an email.

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"The question investors have to ask themselves if they have sold out of the markets is when to get back in."

As at the end of November, $35.4 billion has been net redeemed from mutual funds year-to-date.

Meanwhile, investors poured net $4.2 billion into exchange-traded funds in November. ETFs have seen net inflows every month this year except for June.

"Investors in general are becoming more aware of the effect of fees on the long-term performance of their investment portfolios, and I think it is critical for every investor to ensure they are getting value for what they pay," said Karl Berger, a senior wealth consultant and director at Cidel Asset Management, in an email.

"Mutual funds that are closely correlated with an underlying index and that have a significant fee drag should be far less attractive than an ETF that represents similar exposure, but that has a much lower fee. As investors focus more on 'fee drag', you would think that would continue to favour lower-cost options."

ETFs have gained in popularity because of their lower fees compared to mutual funds, but the mutual fund industry is still much larger and therefore carries a lot of influence in financial markets.

IFIC data show mutual fund assets totalled $1.87 trillion in November, compared to $317.8 billion in ETF assets. The institute says the data account for approximately 85 per cent and 83 per cent of the mutual fund and ETF industry, respectively.

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

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