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Mutual Fund News

Funds with high buy-in costs are high achievers

rcarrick@globeandmail.com

WHAT WE'RE UP TO

Mutual funds are a highly accessible way to invest because you can buy in for as little as $100 (TD Asset Management's funds, for example). But some fund families are a bit more exclusive. They have minimum upfront investment requirements of $5,000 or more, which makes them a stretch for some investors. Let's see if these funds deliver returns that are in line with the higher cost of buying them.

TODAY'S SEARCH

Non-money market funds with minimum upfront investments of $5,000 or more were our starting point. We've ranked them by assets and shown their 10-year quartile ranking to show you how they've performed. Quartiles break funds in a category down into four groups based on their returns. Quartile one is best, while four is the worst.

SO WHAT DID WE TURN UP?

Lots of evidence to suggest that funds with high buy-in costs are high achievers. Of the Top 20 funds on our list as ranked by assets, just a single one failed to rank in the first or second quartile for returns over the 10 years to May 31.

There are a couple of explanations for this, one of which can be found in the column of today's chart that lists the management expense ratio for each fund. When a fund has a high minimum investment, it's able to contain administrative costs by eliminating the need to service multiple small accounts. The net result for investors in some but not all cases is a lower MER. Take PH&N Dividend Income A, for example. It has an MER of 1.11 per cent, which is less than half the average 2.33 per cent for Canadian dividend and income equity funds.

Another reason for the strong returns of funds with high minimum investments has to do with the companies that offer them. In cases like PH&N, Beutel Goodman, Sceptre and McLean Budden, they're pension fund managers who run mutual funds as a sideline. Companies like ABC Funds, Chou Associates Management and Sprott Asset Management are boutique money managers with evident stock picking skills.

Note the funds on the list from the fund industry giant RBC Asset Management. They're actually wrap products, which bundle various individual funds into an instant portfolio. Wraps have become popular in recent years and we'll look at them in a future Cruncher.

Non-money market funds with minimum upfront investments of $5,000 or more
Net assets10-year
(000s)Last reportedMinimumquartile
Fund nameAsset class (as of May 30)MER DateMERinvest. ranking
RBC Select BalancedGlobal Neutral Balanced5,054,3895/30/20081.685,0002
RBC Select ConservativeGlobal Neutral Balanced4,064,7895/30/20081.655,0002
PH&N Dividend Income-ACanadian Focused Equity2,776,5695/30/20081.115,0001
SEI Canadian Equity-OCanadian Equity2,479,9525/30/20080.09150,0001
RBC Select GrowthGlobal Equity Balanced2,426,4545/30/20081.675,0002
Sprott Canadian EquityNatural Resources Equity2,424,76312/31/20073.275,0001
SEI Canadian Fixed Income-OCanadian Fixed Income1,979,7715/30/20080.10150,0001
United-Cdn Fixed Income Pool Cl WCanadian Fixed Income1,259,3825/30/20080.1725,0001
PH&N Canadian Equity-ACanadian Equity1,159,7865/30/20081.125,0002
United-Cdn Equity Value Pool Cl WCanadian Focused Equity1,064,8215/30/20080.2125,0001
PH&N Balanced-ACanadian Neutral Balanced925,6525/30/20080.865,0003
SEI E.A.F.E. Equity-OInternational Equity907,4725/30/20080.16150,0002
Beutel Goodman Canadian EquityCanadian Equity884,0263/31/20081.3110,0002
PH&N Bond-ACanadian Fixed Income843,1005/30/20080.585,0001
ABC Fundamental ValueCdn Focused Small/Mid Cap Equity783,8753/31/20052.00150,0001
Beutel Goodman BalancedCanadian Neutral Balanced731,0553/31/20081.1910,0002
McLean Budden American EquityU.S. Equity729,2753/31/20041.2510,0001
United-US Equity Value Pool Class WU.S. Equity692,2525/30/20080.2125,0002
Chou AssociatesGlobal Small/Mid Cap Equity670,05712/29/20061.7410,0002
Sceptre Equity Growth-ACanadian Small or Mid Cap Equity616,02712/29/20061.585,0001
PH&N Balanced Pension Trust-ACanadian Neutral Balanced555,7385/30/20080.5525,0002
United-Real Estate Invest Pl Cl WReal Estate Equity524,3865/30/20080.2225,0004
Beutel Goodman IncomeCanadian Fixed Income507,9643/31/20080.8010,0001
Saxon Stock FundCanadian Equity445,3975/30/20081.865,0001
GBC Canadian GrowthCdn Focused Small/Mid Cap Equity433,7255/30/20081.92100,0003
Mawer World InvestmentInternational Equity387,7485/30/20081.435,0001
Saxon Balanced FundCanadian Equity Balanced372,2715/30/20081.865,0001
PH&N U.S. Equity-AU.S. Equity322,5135/30/20081.165,0004
Saxon World GrowthGlobal Small/Mid Cap Equity320,9535/30/20081.865,0004
PH&N Canadian Growth-ACanadian Focused Equity299,6915/30/20081.1525,0003
Beutel Goodman Small CapCanadian Small or Mid Cap Equity280,1453/31/20081.3910,0001
North Growth U.S. EquityU.S. Equity240,5545/30/20081.20150,0001
Chou RRSPCdn Focused Small/Mid Cap Equity219,85612/29/20061.7410,0002
Integra BalancedGlobal Neutral Balanced218,72412/30/20052.1110,0001
Saxon Small CapCanadian Small or Mid Cap Equity203,4435/30/20081.865,0002
McLean Budden Balanced GrowthGlobal Neutral Balanced200,8793/31/20040.9510,0001
Mawer Cdn. Balanced RSPGlobal Equity Balanced199,1735/30/20081.005,0001

SOURCE: GLOBEFUND

© 2007 The Globe and Mail. All rights reserved.

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