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Mutual Fund News

The best and the worst places to park your cash

swon@globeandmail.com

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what are we looking for?

How money market funds are holding up, given historically low interest rates. These parking vehicles for cash can invest in everything from short-term Treasury bills to corporate and government bonds or even asset-backed commercial paper (ABCP). Low rates have forced some fund firms to reduce or waive management fees.

today's search

We asked Victor Tan, a fund analyst at Globe Investor, to screen for the top 15 and bottom 15 money market investments in the first seven months of this year. We set the minimum amount invested at $10,000 or lower. Segregated and pooled funds, as well as the U.S.-dollar and duplicate versions, were excluded.

what did we find?

You can end up in the red with a money market fund.

Those with negative returns tend to have higher management expense ratios (MERs) that eat away at returns. That means you should pay close attention to fees when you park your cash.

Front Street Money Market-A was in the red with a 0.5-per-cent loss for the first seven months of this year, and a loss of 0.1 per cent for the year ended July 31. The fund had been charging a hefty MER of 1.91 per cent until the end of April, but has since waived fees for now, according to a spokeswoman for Front Street Capital.

Acuity Short-Term Income Class, with a fee of 1.95 per cent, posted a loss of 0.60 per cent for the first seven months, and a loss of 0.50 per cent over a year. Acuity Money Market, which has an MER of 1.83 per cent, also has not made a distribution since the end of 2008.

AIM Short-Term Income A-version, which charges a fee of 1.71 per cent, lost 0.40 per cent by the end of July, but managed to be mildly positive over one year. AIM Canada Money Market fund, with an MER of 1.19 per cent, has not made or lost money this year.

Steadyhand Savings sits at the top of the return heap with a 1.1-per-cent gain for the first seven months, and 1.8 per cent over one year. While it's hard to get excited about such numbers, it's reassuring to be in the black. Of course, a low MER of 0.65 per cent helps.

AIC Money Market enjoyed the second-best performance with a 0.70-per-cent gain this year, and 1.8-per-cent for the year. Manager Randy LeClair attributes part of its stronger return from investing largely in ABCP with above-average yields. But he stressed the paper is not the nasty, non-bank variety that ran into problems two years ago.

"Our fund uses bank-sponsored ABCP that has a credit-rating of R-1 (high)," he said in an e-mail. "The banks will provide full liquidity even if they have to put it back on their own balance sheet. We have never purchased or held any third-party ABCP which experienced trouble in August, 2007."

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The best and worst performing money market funds this year
(As of July 31, 2009)
Top 15 funds Assets ($millions)Latest MERYTD1YR3YR5YR10YR15YR
Steadyhand Savings*5.80.651.1%1.8%
AIC Money Market178.70.880.7%1.8%2.9%2.6%2.7%3.2%
FMOQ Money Market49.20.400.6%1.8%3.3%3.0%3.2%3.8%
Mackenzie Sentinel Cash Management483.10.530.6%1.6%3.0%2.7%3.0%3.5%
Mackenzie Saxon Money Market Fd-SI23.60.830.6%1.6%3.1%
Quebec Professionals Short Term0.350.6%1.5%3.1%2.9%3.3%4.0%
PH&N Canadian Money Market-D607.60.520.6%1.7%3.2%2.9%3.1%3.6%
RBC Canadian Money Market5995.00.890.5%1.6%2.9%2.5%2.7%3.2%
QFM Money Market0.5%1.5%2.7%
BMO GDN Cdn Money Mkt Classic24.80.900.5%1.4%2.8%2.5%2.7%3.2%
MD Money1127.30.560.5%1.6%3.1%2.8%3.1%3.6%
SEI Money Market-P2.20.660.5%1.5%3.0%2.7%
FÉRIQUE Short Term Income93.80.600.5%1.5%3.1%2.8%3.2%3.8%
Beutel Goodman Money Market65.50.630.4%1.5%2.9%2.7%3.0%3.5%
Standard Life Money Market-A86.80.960.4%1.3%2.7%2.4%2.7%3.4%
Bottom 15 funds
Acuity Short Term Income Class0.71.95-0.6%-0.5%
Front Street Money Market-A2.21.91-0.5%-0.1%
AIM Short-Term Income 'A'6.80.47-0.4%0.5%1.6%1.7%1.7%
Acuity Money Market81.91.830.0%0.1%1.4%1.2%1.4%
Quadrus Cash Management Class63.41.200.0%0.6%2.1%
Mackenzie GPS Allocation0.20.690.0%0.1%
AIM Canada Money Market239.70.270.0%0.6%2.1%1.9%2.2%
Brandes Canadian Money Market74.51.400.0%0.6%2.1%1.9%
Primerica Canadian Money Market36.51.850.0%0.4%1.7%1.4%
AGF Canadian Money Market Account500.21.480.0%0.5%1.9%1.7%
Stone & Co. Flagship Money Mkt A4.31.050.0%0.5%2.1%2.0%2.4%
IA Clarington Money Market105.21.300.0%0.6%2.3%2.0%
Excel Money Market7.80.660.1%0.7%
Hartford Canadian Money Market D0.51.000.1%0.4%2.0%1.9%
Mawer Canadian Money Market29.50.700.1%0.7%2.3%2.2%2.6%3.2%
*Minimum $10,000 investment required
**MER is latest filed to Globe Investor. Some may have changed.
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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