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Mutual Fund News

Some pricey funds that deliver

rcarrick@globeandmail.com

What We're Looking For

High-cost mutual funds that have justified their fees.

Today's Screen

Mutual fund companies apply the ongoing fees they charge against fund returns, so it makes good sense to look at low-cost funds. If you pay less, you put yourself in a position to make more. Still, the fact remains that there are lots of high-cost funds out there, and some of them have performed well.

To highlight them, we took funds in all categories with a management expense ratio of at least 2.50 per cent - that's a high but not crazy MER - and ranked them by their asset size.

We then refined the list by including only those with five-year returns that were first or second quartile over the five years to July 31. Quartile rankings compare returns for a particular category and then break the results down into four groups. First quartile is best, fourth is worst.

What We Found

Several funds from Investors Group, which is the country's second-largest fund company and one of its highest-cost players. It's good to see Investors Dividend on this list because it's the biggest non-money market mutual fund in Canada, with assets of $12-billion.

Note that the MER for the A version of Investors Dividend is 2.68 per cent, which seems bloated in comparison both to the average of 2.54 per cent of its peers and to sub-2 per cent MERs of many other large dividend funds. The high cost of Investors Dividend helps explain why it was a little worse than average in last year's tough markets.

Check out the 4.09 per cent MER on Dynamic Power Canadian Growth - it reflects performance fees that were racked up as this fund built up its five-year, first-quartile returns. Hidden in all of these numbers is the fact that this fund lost just over half its value last year.

Yes, investors should always dig deep when researching funds.

******

High Fee Funds (ranked by largest assets)
(As of July 31/09)Latest(July 31)5-yr
Fund nameCategory Assets ($-mil)MER5-yr % rtnQuartileMER Date
Investors Dividend ACanadian Equity Balanced12,002.62.684.4%27/31/2009
Investors Income Plus Portfolio ACanadian Fixed Income Balanced3,654.92.464.2%17/31/2009
Investors Real Property AMiscellaneous3,512.12.565.0%27/31/2009
Investors Cdn Large Cap Value ACanadian Focused Equity2,507.92.688.3%17/31/2009
Investors Canadian Equity ACanadian Focused Equity2,307.52.683.9%27/31/2009
Investors U.S. Large Cap Value AU.S. Equity1,690.82.69-4.6%27/31/2009
Dynamic Power Canadian GrowthCanadian Focused Equity1,557.34.099.9%16/30/2008
Investors Canadian Balanced ACanadian Equity Balanced1,467.02.685.6%27/31/2009
Investors Global AGlobal Equity1,422.72.693.3%17/31/2009
Dynamic Power BalancedCanadian Neutral Balanced1,274.72.999.6%16/30/2008
IG FI Canadian Allocation ACanadian Equity Balanced1,248.72.686.5%17/31/2009
Investors Retirement Plus Port. ACanadian Neutral Balanced1,203.22.565.2%17/31/2009
Allegro Moderate Portfolio AGlobal Equity Balanced1,167.52.652.2%17/31/2009
Tmpltn International StockInternational Equity1,059.62.570.8%17/31/2009
Investors Retirement Gwth. Port. ACanadian Focused Equity950.42.846.0%17/31/2009
Investors Tact Asset Allocation AGlobal Equity Balanced908.52.904.1%17/31/2009
Primerica GrowthGlobal Equity Balanced897.62.513.8%17/31/2009
AGF International Stock ClassInternational Equity879.92.831.2%17/31/2009
Brandes International EquityInternational Equity784.82.57-1.0%27/31/2009
Investors Euro Mid-Cap Equity AEuropean Equity751.62.693.2%17/31/2009
AGF European Equity ClassEuropean Equity725.82.890.4%27/31/2009
AGF Emerging MarketsEmerging Markets Equity646.92.8316.7%17/31/2009
Investors North American Equity ANorth American Equity625.12.681.2%27/31/2009
AGF Canadian Growth EquityCanadian Small or Mid Cap Equity613.62.872.3%27/31/2009
Primerica Aggressive GrowthGlobal Equity585.62.603.0%17/31/2009
Investors Cdn. Natural Resource ANatural Resources Equity580.32.6910.6%27/31/2009
Dynamic Global DiscoveryGlobal Equity571.22.706.5%16/30/2008
IG AGF Canadian Growth ACanadian Focused Equity569.42.694.3%27/31/2009
IG AGF Canadian Balanced ACanadian Neutral Balanced568.42.945.1%17/31/2009
Renaissance Global Health CareHealth Care Equity547.13.14-0.6%32/27/2009
Dynamic Precious MetalsPrecious Metals Equity546.72.6916.8%16/30/2008
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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