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.
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 $10,000.
WHAT DID WE FIND?
Six of the top eight were index mutual funds.
The cheapest was the TD Canadian Index-e fund with an MER of 0.31 per cent. This no-load fund sold by the fund arm of Toronto Dominion bank is among its "e" (electronic) series, which may be under many investors' radar screens because they can only be purchased online (http://www.tdcanadatrust.com/mutualfunds/tdeseriesfunds/index.jsp).
TD Canadian Index-e fund posted an average annual return of 4.6 per cent over 10 years ended Feb. 28. It outperformed the RBC Canadian Index fund, which has an MER of 0.68 per cent and an average annual return of 4.3 per cent over the same period.
Because both have been trying to track the S&P/TSX total return index's annualized 4.7-per-cent return over a decade, the lower fee of the TD Canadian Index-e fund obviously helped.
Over the long term, the cheapest deal may not always turn out to be the best deal.
The two Canadian equity index funds did not fare as well as some actively managed funds in the same category.
For instance, Mawer Canadian Equity, whose lead manager is Jim Hall, posted an average annual return of 9.6 per cent over 10 years. This fund has a slightly higher MER of 1.20 per cent
Beutel Goodman Canadian Equity, whose lead manager is Mark Thomson, has posted an annualized return of 9.4 per cent over 10 years. This fund has an even higher MER of 1.43 per cent - still low compared with many of its peers costing 2 per cent or more annually.
The trick is being able to have your cake and eat it too.
|Canadian Large/Small Cap Funds with Low MERs|
|(As of Feb. 28)||Latest||(Mar. 31)||% returns (as of Feb. 28)|
|Fund name||Asset class Assets ($-mil)||MER||YTD % rtn||1-yr||3-yr||5-yr||10-yr|
|TD Canadian Index-e||Cdn. Equity||823.11||0.31||3.1||47.1||-1.0||6.2||4.6|
|Altamira Canadian Index||Cdn. Equity||233.84||0.52||2.4||42.3||-0.8||7.0||5.0|
|RBC Canadian Index||Cdn. Equity||553.29||0.68||3.0||46.6||-1.3||6.0||4.3|
|FMOQ Canadian Equity||Cdn. Equity||27.09||0.95||2.6||48.3||-2.6||3.3||4.7|
|Scotia Canadian Index||Cdn. Equity||213.59||0.99||2.9||46.3||-1.4||5.8||4.2|
|BMO Equity Index||Cdn. Equity||419.07||1.00||2.8||45.3||-1.7||5.6||3.9|
|Integra Equity||Cdn. Equity||61.53||1.00||2.2||41.4||-6.1||1.8||5.2|
|CIBC Canadian Index||Cdn. Equity||766.27||1.08||2.9||45.6||-1.7||5.6||3.7|
|PH&N Dividend Income-D||Cdn. Dividend & Incm Equity||2,034.93||1.11||5.9||50.6||-4.4||2.4||9.4|
|PH&N Canadian Equity-D||Cdn. Equity||864.50||1.12||3.3||47.2||-3.6||3.8||6.1|
|Mawer Canadian Equity||Cdn. Equity||110.68||1.20||2.9||43.0||-0.5||5.9||9.6|
|Integra Canadian Value Growth||Cdn. Equity||135.59||1.23||3.6||50.8||-2.3||4.6||3.7|
|McLean Budden Canadian Equity D||Cdn. Equity||19.58||1.25||2.5||43.8||-1.4||5.4|
|McLean Budden Cdn Equity Growth D||Cdn. Focused Equity||92.76||1.25||2.2||43.3||-3.6||3.9||4.2|
|McLean Budden Cdn Equity Value D||Cdn. Equity||20.04||1.25||1.4||34.6||-3.3||3.2||6.4|
|PH&N Community Values Cdn Equ-D||Cdn. Equity||22.74||1.35||3.7||46.2||-3.1||4.5|
|Beutel Goodman Canadian Dividend||Cdn. Dividend & Incm Equity||11.22||1.41||4.7||38.8||-1.3||4.7|
|Beutel Goodman Small Cap||Cdn. Sml/Mid Cap Equity||332.85||1.41||4.0||73.6||4.6||8.5||12.1|
|Beutel Goodman Canadian Equity Plus||Cdn. Focused Equity||0.91||1.42||2.3||37.9||-2.7||3.6|
|Beutel Goodman Canadian Equity||Cdn. Equity||1,139.71||1.43||3.8||44.2||-0.3||5.6||9.4|
|Beutel Goodman Canadian Intrinsic||Cdn. Focused Equity||2.44||1.43||3.3||28.4||-2.8||4.0||7.7|
|RBC O'Shaughnessy Canadian Equity||Cdn. Focused Equity||1,172.22||1.47||6.7||48.0||-5.1||1.5||8.1|
|AGF Canadian Large Cap Dividend-D||Cdn. Focused Equity||2,450.47||1.58||1.7||37.7||-3.3||4.3|
|CI Signature Dividend (Class Z)||Cdn. Dividend & Incm Equity||125.66||1.58||3.3||41.4||-0.7||3.5|
|Dynamic Dividend||Cdn. Dividend & Incm Equity||467.87||1.58||4.1||28.8||-2.7||2.9||8.7|
|Dynamic Dividend Value||Cdn. Focused Equity||392.38||1.58||1.4||37.6||-4.4||1.7||7.0|
|Sceptre Equity Growth-A||Cdn. Small or Mid Cap Equity||374.85||1.58||5.3||69.0||-7.2||5.6||12.4|
|Trimark Canadian-SC||Cdn. Focused Equity||601.95||1.65||-0.7||54.1||-5.0||1.8||5.3|
|Scotia Canadian Dividend||Cdn. Dividend & Incm Equity||2,342.12||1.66||3.6||39.6||-1.8||4.4||9.0|
|Sceptre High Income-A||Cdn. Dividend & Incm Equity||44.55||1.67||1.8||40.1||-3.2||2.8|
|BMO Nesbitt Burns Cdn Small Cap Index||87.6||-2.1||5.0||7.7|
|S&P/TSX Small Cap||4.2||70.8||-8.3||-3.0||1.8|
|S&P/TSX Total Return||3.1||47.6||-0.9||6.5||4.7|
|Source: Globe Investor|
© 2007 The Globe and Mail. All rights reserved.
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