Canadian Banks / Mutual Funds Watch (2006-09-29)
Canadian investors really treat our big banks and their mutual funds as angels. While our American friends keep the pressure on fund companies to lower MERs, Canadians cannot see through the devil’s disguise. I wouldn’t mind as much if those funds performed well, but their abysmal net returns makes me wonder why they can justify those high fees? Our investment watchdogs north of the border have failed in affecting mutual fund fee changes. But instead of playing the victim, why not step up and try to be a solution to the problem? This is the first installment of a series called Canadian Banks / Mutual Funds Watch, that I intend to develop on-going.
CIBC - What’s In A Name?
At the end of August, CIBC Asset Management announced 2 english name changes to its fund line-up:
CIBC Core Canadian Equity Fund –> CIBC Canadian Equity Fund
CIBC Canadian Imperial Equity Fund –> CIBC Canadian Equity Value Fund
Do you think the change is for the better? What were they thinking initially by using such non-descriptive branding in their mutual funds? What does ‘Core’ and ‘Imperial’ have to do with investments? They might as well have named their mutual funds like car manufacturers and call them “Imperius”.
But who are they trying to fool? Are we to believe that the Canadian Equity Value Fund is a true value fund? The last time I look at their holdings, they didn’t seem like value investing philosophy in action Let’s compare the top 10 holdings between the 2 funds as of August 31st, 2006.
| CIBC Canadian Equity Value | CIBC Canadian Equity | ||
|---|---|---|---|
| EnCana Corp. | 6.51% | EnCana Corp. | 5.43% |
| Royal Bank of Canada | 6.34% | Manulife Financial | 5.19% |
| Manulife Financial | 4.51% | TD Bank | 5.04% |
| Imperial Oil | 4.04% | Petro-Canada | 4.91% |
| Inco Ltd. | 4.04% | Bank of Nova Scotia | 4.86% |
| Bank of Nova Scotia | 3.84% | Canadian National Railway | 3.65% |
| Bank of Montreal | 3.37% | Bank of Montreal | 3.59% |
| Alcan Inc. | 3.22% | Inco Ltd. | 3.27% |
| Shell Canada | 3.19% | Teck Cominco Ltd. | 3.26% |
| TD Bank | 3.01% | National Bank of Canada | 2.91% |
Did you notice that 6 of the top 10 selections overlapped both funds? Am I looking at 2 Canadian Equity funds, or 2 Canadian equity value funds? This is actually a common problem among Canadian mutual funds. You can find the same holdings in a growth fund, in a value fund, in an imperial fund.. or whatever the fund. The limited number of Canadian companies is in disproportion to the sheer number of mutual funds out there. So it doesn’t really matter which fund you choose! By the way, here are some statistics on the 2 CIBC funds.
| CIBC Canadian Equity Value | CIBC Canadian Equity | ||
|---|---|---|---|
| MER: | 2.19% | MER: | 2.28% |
| Average return since inception: | 5.84% | Average return since inception: | 6.72% |
TD - More Fee Double-Talk
TD Assets Management announced proposals that, if approved, would raise fees on several funds by making TDAM responsible for more “fixed and identifiable costs”. The firm is also proposing changes to the investment objectives of selected funds. TD Mutual Funds president, Timothy Pinnington, had this to say about the changes:
“There is an increasing focus on the variability of MERs. Our proposal addresses this concern by providing investors with greater certainty with respect to certain components of the MER, which would become fixed and predictable. In doing so, we also expect a decrease in the MERs for the series of certain funds for the immediate benefit of a large number of investors. This approach is the same as the well-received approach recently taken for ten new funds.”
Isn’t Timothy a great politician? How many of these “certain funds” that will benefit with a decrease in MER versus how many of TD funds that will experience an increase in fees? What do they mean by making certain MER components fixed and predictable? Do they mean to over-estimate the expenses and profit if they manage to keep costs below budget? Or will they make up for any deficit on their own accord, without passing it to investors? What are the chances of that? This sort of political mutual fund double-talk has no place here at Investorial.
What is certain right now is that the policy is introducing a “new” administration fee, with funds like the TD Balanced Fund at the low end at 0.08%, all the way to a fee of 0.35% for the TD Asian Growth Fund. Unitholders of TD Mutual funds should take note of a vote on the fee proposals at special meetings to be held on December 7 in Toronto. It’s time to let your voice be heard!
Dundee - The New Kid On The Block
Every Canadian knows that the banks are the largest mutual funds / investment companies around here. But The Dundee Group of Companies is looking to turn the tables around. Dundee started as a network of independent financial advisors with Dundee Wealth Management. But they are now Canada’s newest Schedule 1 Chartered Bank. The Dundee Bank of Canada commenced operations in July 2005, under the name of Dundee Wealth Bank. Effective Sept. 18, 2006, the Bank changed its name to Dundee Bank of Canada to better reflect the Bank’s national scope.
I’ve noticed with interest as more and more smaller / regional banks pop up to oppose the big 5. We’ve seen President’s Choice, ING, Canadian Western Bank, Laurentian Bank, National Bank, Citizen’s Bank come up in the last 5 years with more visibility, profitability and market share. Any progress in dethroning the monopolies of the big 5 banks is definitely welcomed by this financial blogger.
Related Posts:
- CIBC Fund Name Changes - Income Trusts Falling Out Of Favour?
- Fidelity launches LifeCycle funds
- Who Cares About MorningStar.ca?
- ETFs: Too Much Of A Good Thing?
One Response to “Canadian Banks / Mutual Funds Watch (2006-09-29)”
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Laura Lea Macaulay Says:
November 6th, 2007 at 4:38 pmDo you know how many days the banks should have to transfer funds on a T2033 from the bank to a mutual fund company? Between mutual fund companies it is typically 3 business days. The Bank of Montreal claims they have 15-20 days. A cheque issued for funds due on Oct. 29 still has not reached AGF for invesment on a T2033 issued on Oct. 5 for funds due Oct. 7/07.
OFSI has not responded - ref # 449.
The interfact for entry of this information is offset a bit to the left. It cuts off about 1/2 and inch of text on the left side, so I was not able to read the text on the left margin, nor can I see what I am typing in that space.
