Sept. 5 (Bloomberg) -- Canadian mutual-fund sales had redemptions of about C$1.55 billion ($1.47 billion) in August after concerns that bonds would default prompted Canadian investors to sell money-market funds.

Redemptions exceeded sales by C$1.3 billion to C$1.8 billion, the Toronto-based Investment Funds Institute of Canada said today in a preliminary report. That compared with net sales of C$744 million in August 2006.

Investors shunned money-market funds last month after the market for asset-backed commercial paper issued by non-bank dealers seized up on concern the funds may have investments linked to U.S. subprime mortgages.

Royal Bank, the country's largest lender, had redemptions of C$64 million, according to a statement today. It was the first monthly decline in three years for the Toronto-based bank, according to the Investment Funds Institute of Canada.

Winnipeg, Manitoba-based IGM Financial, the largest fund company, had net withdrawals of C$144.7 million. CI Financial Income Fund, the second-largest, said it had net redemptions of C$137 million.

Canadian banks and pension funds agreed last month to extend maturities on C$35 billion in commercial paper after issuers were unable to roll it over.

Assets in Canadian mutual funds were about $696.1 billion in August, a 1.1 percent decline from the previous month.

To contact the reporters for this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net.

Last Updated: September 5, 2007 17:10 EDT