Skip navigation

Mutual Fund News

Cheapest deal on fees not necessarily the best

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

Canadian stock mutual funds for cheapskates.

It's important to keep an eye on fees because they will eat away at returns over time.

Let's find the lowest-cost funds given that fees will rise when the harmonized sales tax is applied in Ontario (13 per cent) on July 1, while British Columbia is also moving in the same direction. The new tax replaces the existing 5 per cent GST on funds. Funds are affected if they are run by a firm headquartered in the province implementing the new tax.

TODAY'S SEARCH

We asked Globe Investor fund analyst Victor Tan to screen for 30 funds with the lowest management expense ratio (MER) among Canadian large and small cap company funds with a record of at least five years , and also have a five-year record. He excluded U.S. dollar, segregated, pooled and duplicate versions of the funds, as well as those only available to members of a certain organization. Only funds requiring a minimum investment of no more than $10,000.

WHAT DID WE FIND?

Six of the top eight were index mutual funds.

The cheapest was the TD Canadian Index-e fund with an MER of 0.31 per cent. This no-load fund sold by the fund arm of Toronto Dominion bank is among its "e" (electronic) series, which may be under many investors' radar screens because they can only be purchased online (http://www.tdcanadatrust.com/mutualfunds/tdeseriesfunds/index.jsp).

TD Canadian Index-e fund posted an average annual return of 4.6 per cent over 10 years ended Feb. 28. It outperformed the RBC Canadian Index fund, which has an MER of 0.68 per cent and an average annual return of 4.3 per cent over the same period.

Because both have been trying to track the S&P/TSX total return index's annualized 4.7-per-cent return over a decade, the lower fee of the TD Canadian Index-e fund obviously helped.

Over the long term, the cheapest deal may not always turn out to be the best deal.

The two Canadian equity index funds did not fare as well as some actively managed funds in the same category.

For instance, Mawer Canadian Equity, whose lead manager is Jim Hall, posted an average annual return of 9.6 per cent over 10 years. This fund has a slightly higher MER of 1.20 per cent

Beutel Goodman Canadian Equity, whose lead manager is Mark Thomson, has posted an annualized return of 9.4 per cent over 10 years. This fund has an even higher MER of 1.43 per cent - still low compared with many of its peers costing 2 per cent or more annually.

The trick is being able to have your cake and eat it too.

*******

Canadian Large/Small Cap Funds with Low MERs
(As of Feb. 28)Latest(Mar. 31)% returns (as of Feb. 28)
Fund nameAsset class Assets ($-mil)MERYTD % rtn1-yr3-yr5-yr10-yr
TD Canadian Index-eCdn. Equity823.110.313.147.1-1.06.24.6
Altamira Canadian IndexCdn. Equity233.840.522.442.3-0.87.05.0
RBC Canadian IndexCdn. Equity553.290.683.046.6-1.36.04.3
FMOQ Canadian EquityCdn. Equity27.090.952.648.3-2.63.34.7
Scotia Canadian IndexCdn. Equity213.590.992.946.3-1.45.84.2
BMO Equity IndexCdn. Equity419.071.002.845.3-1.75.63.9
Integra EquityCdn. Equity61.531.002.241.4-6.11.85.2
CIBC Canadian IndexCdn. Equity766.271.082.945.6-1.75.63.7
PH&N Dividend Income-DCdn. Dividend & Incm Equity2,034.931.115.950.6-4.42.49.4
PH&N Canadian Equity-DCdn. Equity864.501.123.347.2-3.63.86.1
Mawer Canadian EquityCdn. Equity110.681.202.943.0-0.55.99.6
Integra Canadian Value GrowthCdn. Equity135.591.233.650.8-2.34.63.7
McLean Budden Canadian Equity DCdn. Equity19.581.252.543.8-1.45.4
McLean Budden Cdn Equity Growth DCdn. Focused Equity92.761.252.243.3-3.63.94.2
McLean Budden Cdn Equity Value DCdn. Equity20.041.251.434.6-3.33.26.4
PH&N Community Values Cdn Equ-DCdn. Equity22.741.353.746.2-3.14.5
Beutel Goodman Canadian DividendCdn. Dividend & Incm Equity11.221.414.738.8-1.34.7
Beutel Goodman Small CapCdn. Sml/Mid Cap Equity332.851.414.073.64.68.512.1
Beutel Goodman Canadian Equity PlusCdn. Focused Equity0.911.422.337.9-2.73.6
Beutel Goodman Canadian EquityCdn. Equity1,139.711.433.844.2-0.35.69.4
Beutel Goodman Canadian IntrinsicCdn. Focused Equity2.441.433.328.4-2.84.07.7
RBC O'Shaughnessy Canadian EquityCdn. Focused Equity1,172.221.476.748.0-5.11.58.1
AGF Canadian Large Cap Dividend-DCdn. Focused Equity2,450.471.581.737.7-3.34.3
CI Signature Dividend (Class Z)Cdn. Dividend & Incm Equity125.661.583.341.4-0.73.5
Dynamic DividendCdn. Dividend & Incm Equity467.871.584.128.8-2.72.98.7
Dynamic Dividend ValueCdn. Focused Equity392.381.581.437.6-4.41.77.0
Sceptre Equity Growth-ACdn. Small or Mid Cap Equity374.851.585.369.0-7.25.612.4
Trimark Canadian-SCCdn. Focused Equity601.951.65-0.754.1-5.01.85.3
Scotia Canadian DividendCdn. Dividend & Incm Equity2,342.121.663.639.6-1.84.49.0
Sceptre High Income-ACdn. Dividend & Incm Equity44.551.671.840.1-3.22.8
BMO Nesbitt Burns Cdn Small Cap Index87.6-2.15.07.7
S&P/TSX Completion4.459.7-5.91.71.6
S&P/TSX Small Cap4.270.8-8.3-3.01.8
S&P/TSX Total Return3.147.6-0.96.54.7
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

Search Fund News


Advanced Search

GlobeinvestorGOLD.com

Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.

Discover a wealth of investment information and and exclusive features.

Free E-Mail Newsletters

  • Morning news headlines
  • Morning business headlines
  • Financial highlights
  • Tech alert
  • Leisure

Sign-up for our free newsletters



Back to top