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Mutual Fund News

Money parked, gains stuck in neutral

swon@globeandmail.com

What are we looking for?

How Canadian money market funds are faring in this low interest rate environment. These investments are essentially parking vehicles for cash.

The search

We screened for the eight best and eight worst performers over one year ended Aug. 31. U.S. dollar, segregated, pooled, and duplicate versions of funds were excluded. We also left out funds requiring more than a $10,000-minimum investment.

What did we find?

Investors making puny - if any - returns on their funds.

The eight worst-performing money market funds earned nothing over 12 months. But that's only after fund companies ate any fees and losses.

Acuity Money Market, which has a very high management expense ratio of 1.91 per cent, was among those ringing in a zero-per-cent return.

"I think pretty much all the fund companies are subsidizing them," said Stephen Crawford, national sales manager for Acuity Funds Ltd. "Money market funds have a net asset value of $10 [per unit], and that is something that most mutual fund companies want to keep in place. It is not guaranteed by law or by regulation, but most companies have honoured it."

Hartford Canadian Money Market fund also did not earn anything. "We don't want people in a money market fund to have a negative return," said Mary Taylor, senior vice-president of Hartford Investments. "It is not what you would expect. It's not like you are taking equity risk or something."

Matrix Short Term Income Fund was the leader, eking out a meagre 0.72-per-cent gain over a year, while Matrix Money Market fund was up 0.34 per cent.

Lowering the MER and chopping the trailer fee paid to financial advisers last year helped returns for the two funds, which are invested in Canadian Treasury bills, provincial bonds and short-term corporate debt, said David Balsdon, chief compliance officer of Mavrix Fund Management Inc.

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HOW CANADIAN MONEY MARKETS HAVE FARED OVER THE PAST YEAR

($-mil)% return (to Aug. 31)
LeadersMERNet assets1-yr 2-yr 3-yr 5-yr10-yr
Matrix Short Trm Income-CC0.533.90.720.861.131.72n/a
Quebec Professionals Short Term0.3562.00.630.981.882.622.85
Matrix Money Market0.339.10.340.601.362.042.21
Meritas Money Market0.744.30.310.471.191.98n/a
FÉRIQUE Short Term Income0.2676.00.290.761.762.432.65
CI Short-Term Corporate Class0.77167.10.290.851.452.022.07
CI Money Market0.751252.10.280.431.241.942.05
MD Money0.56753.30.280.841.762.442.59
Laggards
Acuity Money Market1.9149.70.000.050.481.091.01
Quadrus Cash Management Class1.0235.40.000.220.971.60n/a
Hartford Canadian Money Market B1.159.60.000.100.751.521.79
imaxx Money Market0.664.70.000.281.151.84n/a
AGF Canadian Money Market Account0.39353.10.000.190.911.49n/a
Primerica Canadian Money Market0.7626.30.000.150.801.29n/a
Mawer Canadian Money Market0.4123.50.010.301.071.862.11
IA Clarington Money Market0.3485.10.010.241.111.761.90
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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