Sales Review and Demand Forecast – Fidelity

Fidelity Canada posted net new sales of long term funds of $100mn in September 2010 or $123mn after seasonal adjustment; the company’s 12-month average stands at $215mn (see Chart # 1 in our detailed reporting.)

The firm’s seasonally adjusted net new sales ratio stood at 3.3% in September compared to 2.8% for the rest of the industry. During the past 12-months these rates for Fidelity and the rest of the industry were 6.4% and 3.7% respectively and our forecast over the next 12-months is 7.4% for Fidelity and 3.7% for the rest of the industry (see Charts # 17 and 24). The firm’s net new sales ratio ranking for long term funds stood at 43 during September versus 45 during the past three months and at the 56th percentile on a 12-month basis (see Chart # 18).

Fidelity’s market share of long term funds of 7.936% is up by 1.5% during the past year or some 11.5 basis points. Net new sales accounted for about 20.4bps with gross sales at +7.0bps and redemptions at +13.4bps. Transfers were +12.9bps and all other factors accounted for -21.8bps (see Chart # 4 and Table # 11). The largest absolute contributor to Fidelity’s gains in market share over this period were products in the Canadian Neutral Balanced asset class. These accounted for about 24.1bps with about 21.6bps from net new sales (see Chart # 5 and Table # 12).

Over the next 12-months, through September 2011, we estimate the firm’s market share to rise about 3.2% to 8.190% (see Chart # 3). Net new sales of Fidelity’s long term funds are projected at about $3.45bn compared to $2.6bn for the latest 12-month period (see Table # 21 for detailed category projections and Table # 1 for summary aggregate projections through 2011). For the rest of the industry, net new sales are projected at about $20.0bn versus $17.3bn respectively (see Table # 22). Fidelity’s gross sales are projected to increase by about 6.1% over the next 12-months versus +4.4% for the rest of the industry. For Fidelity, redemptions are projected to decline about 6.0% over the next 12-months versus +2.0% for the rest of the industry. On a calendar year basis, Fidelity is projected to post net new sales of about $4.2bn in 2011 versus an estimated $2.2bn in 2010 (Table # 1).

On a “FairShare” basis (see Tables # 18 and 19), Fidelity’s seasonally adjusted net new sales benchmark stood at about -$36mn in September though the actual net new sales of $123mn represents an annualized outperformance of about $1.9bn (see Chart # 8). During the past year, the actual net new sales outperformance was $2.2bn (5.7% of assets) and during the next 12-months an outperformance of about $2.4bn (5.2% of assets) is projected (see Chart # 9 and Tables # 19 and 20). In the 12-months through September, Fidelity’s gross sales exceeded its fair share benchmark by 27.3% which is projected to stand at about +20.4% over the next year (Chart # 23). Redemptions undercut Fidelity’s benchmark by 6.3% and are projected to stand about 13.5% below benchmark through September 2011.

As of September 2011, we project company net new sales will be running at a seasonally adjusted annualized pace of about $4.9bn versus the September 2010 pace of $1.5bn. We have a projected total for Fidelity of $3.45bn in net new sales during the next 12-months.

For access to the details of this report, contact Hugh Murphy at 905-919-1926.