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Mutual Fund News

Too much info

History suggests there are two ways to keep the masses in the dark: One is to deprive them of information; the other is to drown them in it. The mutual fund industry has adopted the latter technique, perhaps to distract us from the bloodbath.

The stack of statements that arrived in January was ostensibly to inform us of how things went in 2002. Hey, we know how things went in 2002: really badly. As in, the kids go to university for three years instead of four.

These documents, however, work in a kind of inverse proportionality to the Dow-the way one used to gauge the shabbiness of a country's economy by the size of its stamps. In the past couple of years, statement paper has grown increasingly rich, with flashes of colour and the inclusion of pie charts showing things like the geographical breakdown of the holdings.

Mackenzie's comes with a 3-D diagram illustrating year-over-year performance. AGF plans to add "branding icons" indicating retirement activities (for example, a Muskoka chair) to reinforce its "What are you doing after work?" tag line.

It's all in response to customer demand for clearer information, insists AGF's director of communications Patricia Phillips. "People just want to know, 'How much money do I have?' We like to show it nice and big. There's nothing more irritating," she continues, "than the bad old statements where you couldn't tell where you were."

On the other hand, the graphics dispassionately illustrate the (allegedly short-term) erosion of your life savings. "I guess," admits Phillips, "that there's an emotional risk [that] people will say, 'Ouch,I hate this company.'"

Unintended ironies abound: "The benefits of professional advice," the CI Funds statement declares in a sonorous typeface, just above the bit which reveals that my holdings have lost 80% of their value. Fidelity, perhaps attempting to flatter its clients, provides a page of "important information to help you read your statement," including this easy formula for calculating rate of return: "R=((S1xS2x Sn)-1)x100% = ((1.2x1.28)-1)x100% = (1.536-1)x100% = 0.536x100% = 53.60% since inception." Elsewhere, however, the statement informs me that my "personal rate of return" since the initial purchase is a less impressive -20.31%.

The obvious comparison is to the phone bill, a document of unsurpassed opacity. Yet maybe we're asking the impossible of investment statements. We'd like to read, or be given, words of comfort, some understanding of the impetuous decisions writ large in those charts. Then again, that's why God created stockbrokers, who, upon fielding panicky calls from statement-wielding clients, will say many things, the gist of which is, invariably, "hold."

© 2007 The Globe and Mail. All rights reserved.

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