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Mutual Fund News

New products stress comfort

Special to The Globe and Mail

An investment climate clouded by months of market turbulence has not only influenced the nature of new products this RRSP season, it has also tempered the flow of new introductions.

What new products there are tend to stress traditional investment philosophies, with the emphasis on investors' comfort levels and convenience in tracking returns, say industry insiders.

That's the thinking behind Franklin Templeton Investments' Quotential Program, a wrap program with four varied investment portfolios designed to offer diversity to investors while eliminating the need to track the performance of a collection of funds, says Chisholm Lyons, the firm's vice-president of marketing. At a time when surveys indicate some investors are afraid to open their statements, "there's been an uptick in flow to more conservative products, more diversified products," Mr. Lyons says.

The Scotia Partners Portfolios aim to simplify investing by bundling proprietary and third-party funds so that investors need track only one fund's performance, says Glen Gowland, vice-president of Scotia Securities Inc. "Investors can get overwhelmed or get paralyzed in the chase for returns. These days, it's not about products so much as it is taking time to build the right portfolio for the customer."

AGF Funds Inc.'s expansion of the choices available through Harmony, its tailored investment program, emphasize asset allocation, diversification and preservation of capital.

Return on Innovation Fund Inc. is pitching its recently launched ROI Fund as addressing stability and returns. The fund will invest in established Canadian businesses because "investors have had enough volatility," says CEO John Sterling. Its compensation structure pays investors dividends before the fund manager receives a performance bonus.

than releasing new products, Bank of Montreal is concentrating on personalizing investment advice to help customers reach a comfort level to ride out unsettled markets, says Judy Thomson, director of BMO's mutual fund division.

"It's a back-to-basics year," agrees Brenda Vince, president of RBC Funds Inc., who predicts that dividend funds will be popular because they demonstrate returns for skittish investors. Those going for equities will find Canadian funds attractive because of the comfort of investing at home, she adds.

On the fixed-income side, TD Canada Trust has introduced a five-year redeemable guaranteed investment certificate to encourage customers to adopt a laddering strategy, staggering returns so that some money is always coming due should interest rates increase, says Larry Hyett, associate vice-president of TD Canada Trust's term products.

"Typically customers have not been willing to look at long-term [fixed] investments," he says.

Some investors disappointed at returns will look at alternatives, says Aileen Pollock, a certified financial planner with Pollock Financial in Toronto. "This season I'm looking at labour-sponsored investment funds" for some clients. While they carry risk, they offer significant tax credits on top of the RRSP deductions.

Income trusts will also be attractive to some investors because of their regular distribution of cash. But buyers need to remember that, because of a variety of deductions, the income that flows out to the investor will be lower than the original stated cash flow, says Gena Katz, senior principal with Ernst & Young's tax practice in Toronto. "Income trusts are tax-efficient but RRSPs are already-tax-efficient."

Equity-linked GICs, which tie their results to specific market indices while guaranteeing protection of capital, will likely attract significant numbers of investors this season because of the comfort they offer, she adds.

For those looking for a way to finance an RRSP contribution, this year TD Canada Trust is offering customers with a line a credit the opportunity to lock in a portion of that line at RRSP loan rates.

© 2007 The Globe and Mail. All rights reserved.

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