Investment funds

A major beneficiary of the trend toward savings self-reliance is the investment and mutual funds industry. Mutual funds pool the assets of investors into a wide array of investments, including Canadian and foreign common shares and bonds issued by companies and governments. This allows investors with only modest amounts of money to invest in growth industries in different parts of the world.

Growth in the mutual funds industry since the late 1980s has been dynamic. From about $67 billion in 1992, the total market value of Canadian mutual funds’ net assets increased to more than $426 billion by 2001, before falling off for the first time in 13 years in 2002, when the total market value decreased 8.2% to $391 billion. Net new sales for 2002 were down 88% from 2001.

By the end of 2002, 26.1% of all mutual fund assets were invested in preferred and common stocks. About 33.7% were invested in foreign securities and a further 18.3% in Government of Canada treasury bills and bankers’ acceptances and paper.

Although not all mutual fund investments are held in RRSPs, the growth in retirement savings provides the most critical impetus behind the industry's growth. When RRSP contribution limits were increased in 1991, mutual fund investments jumped and banks and other financial institutions began offering their own brand of mutual funds.

The fall in interest rates over the 1990s and into the new century also contributed to mutual fund growth, as investors shifted from low-yielding guaranteed investments to the promise of higher returns on stock-based mutual funds.

The number of fund accounts held by investors also reflects the immense popularity of mutual funds. In 1992, there were 5.5 million mutual fund accounts; by the end of 2002, this number had increased almost tenfold to 53.2 million.