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Invest in money market funds with low fees

rcarrick@globeandmail.com

WHAT'S OUR OBJECTIVE?

Provide a lesson in the importance of low fees when choosing a money market fund. Nothing is more important than fees - that's our thesis going into this screen.

TODAY'S SEARCH

All Canadian money market funds with assets of more than $100-million were thrown into the mix and then ranked from highest management expense ratio on down.

Why look only at larger funds? Because that's where the money is. All funds are displayed with the quartile rankings for their one-, three-, and five-year returns for periods ending Jan. 31. Quartiles divide funds into four groups, with the first quartile being the elite and the fourth being the dross.

SO WHAT DID WE TURN UP?

Enough evidence to suggest that owning a money market fund with a high MER is, well, dumb. The average MER in the Canadian money market category is 1.05 per cent, which is a joke when you consider that T-Bills yield about 3.2 per cent these days. You can see by our screening results what happens when you end up in a fund that is expensive to own. Has a single one of our highest-fee funds managed to reach the upper echelons of performance? Not a chance.

Let's remember as well that running a money market fund isn't brain surgery. All you do is keep rolling over short-term securities that include government T-Bills and corporate borrowings. There's no need for virtuoso fund management here, just a steady hand.

In this context, there's simply no justification for a money market fund to charge high fees. Equity funds can say the manager's a star, and that's why the fees are high (be skeptical, my friends). But money market funds are just commodity products that should be bought at the lowest price possible.

Why are there millions of dollars in those high-fee funds? Answer: inattentive investors and lazy investment advisers. It's time to get with the program, guys. With money market funds, low MERs rule.

Canadian Money Market funds with over $100 Million in assets

Quartile ranking
Last reported(as of Jan. 31, 2008) (as of Jan. 31, 2008) (as of Jan. 31, 2008)
Fund name Net assetsMER dateMER1-yr rank3-yr rank5-yr rank
Trimark Interest - DSC113.91/31/20081.86444
AGF Canadian Money Market Account381.81/31/20081.58444
Manulife Money Fund - D596.212/29/20061.55344
Dynamic Money Market267.56/29/20071.38444
AIM Canada Money Market188.81/31/20081.33434
BMO T-Bill204.09/28/20071.31444
Mackenzie Sentinel Money Market301.96/30/20061.24333
BMO Money Market561.39/28/20071.19333
CI Short-Term Corporate Class655.01/31/20081.18333
CIBC Money Market4,388.96/29/20071.16223
Desjardins Money Market254.41/31/20071.15333
Scotia Money Market1,647.41/31/20081.14232
Investors Canadian Money Market654.81/31/20081.13223
Scotia T-Bill174.41/31/20081.12333
CIBC Canadian T-Bill329.88/31/20071.12333
Renaissance Money Market1,027.88/31/20071.09222
CI Money Market992.81/31/20081.06222
Frk Tmp Money Market - A671.51/31/20081.06222
AIC Money Market187.66/29/20071.06122
National Bank Money Market492.31/31/20081.04222
HSBC Canadian Money Market-I471.011/30/20071.02322
Fidelity Canadian Money Market-A371.56/29/20071.01222
Trimark Interest310.71/31/20080.98222
RBC Canadian Money Market3,538.81/31/20080.98222
RBC Canadian T-Bill1,412.71/31/20080.97222
TD Canadian T-Bill301.11/31/20080.94322
TD Canadian Money Market4,182.81/31/20080.93222
Frk Tmp Treasury Bill217.91/31/20080.8222
Manulife Money Fund596.212/29/20060.79112
Social Housing Cdn Money Market107.31/31/20080.72111
Fidelity Canadian Money Market-B363.66/29/20070.71132
Investors Premium Money Market570.71/31/20080.66111
Altamira T-Bill139.61/31/20080.63111
CIBC Premium T-Bill1,597.18/31/20070.58111
MD Money1,024.012/29/20060.57111
Scotia Premium T-Bill1,022.11/31/20080.55211
Mackenzie Sentinel Cash Management414.96/30/20060.54111

SOURCE: GLOBEFUND

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