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Low fees, 'staying out of trouble' helped leading fund

swon@globeandmail.com

What are we looking for?

Best returns among Canadian money market funds over three years.

These funds are parking vehicles for cash, but it's been tough to eke out a return, after fees, in the current low interest rate environment.

The screen

We searched for the 15 top performers over three years ended Oct. 31. U.S. dollar, segregated and duplicate version of the funds were excluded. We also left out funds catering to one professional group, and those requiring more than a minimum investment of $10,000.

What did we find?

Returns of less than 1 per cent - if you were lucky.

While some money market funds were left with a big fat zero over three years, Steadyhand Savings emerged as the best performer with an annual gain of 0.74 per cent. A low fee of 0.30 per cent helped this fund, which also requires a minimum investment of $10,000.

"For money market funds, fees matter a lot," says Brian Eby, a portfolio manager with Connor, Clark & Lunn Investment Management Ltd., which runs the Steadyhand fund. "The other is staying out of trouble. We do tend to own provincial and corporate commercial paper to get some modest yield enhancement, but nothing overly interesting."

Some funds were exposed to troubled asset-backed commercial paper (ABCP) in 2007, but investors were ultimately not affected because their sponsoring companies bought back this ill-fated debt back from its money market offerings.

Mr. Eby isn't expecting money market returns to improve any time soon. "Unfortunately, our view is that interest rates will probably stay low for some time," he said.

"It is possible next year that we get the Bank of Canada to start to raise rates, but I don't expect it to be substantial."

Europe, which is falling deeper into recession as it contends with a debt crisis, and the so-called fiscal cliff of tax increases and spending cuts set to come into effect in the United States next year "will keep monetary policy acommodative," he said. "That will keep downward pressure on interest rates globally."

*****

TOP-PERFORMING CANADIAN MONEY MARKET FUNDS FOR THREE YEARS ENDED OCT. 31

Fund nameSymbolMERAssets ($-mil)3-yr % rtn (Oct. 31)1-yr % rtn (Oct. 31)2011 % rtn2010 % rtn2009 % rtn2008 % rtn
Steadyhand Savings0.306.20.74%0.90%0.90%0.48%0.52%2.52%
Manulife Money Fund0.49761.10.69%0.87%0.90%0.42%0.33%2.98%
Beutel Goodman Money Market-D0.2250.90.68%0.97%0.90%0.31%0.47%2.94%
Matrix Short Trm Income-CC0.441.80.66%0.71%0.81%0.45%0.82%1.94%
CI Money Market0.77715.10.63%0.77%0.69%0.45%0.19%2.12%
Stone & Co. Flagship Money Mkt A0.302.40.63%0.79%0.80%0.40%0.11%1.88%
iShares Premium Money Market Com ETFCMR-T0.270.63%0.78%0.74%0.40%0.37%
Matrix Money Market0.446.30.61%0.60%0.82%0.42%0.40%2.21%
CI Short-Term Corporate Class0.6953.80.57%0.75%0.69%0.39%1.13%1.86%
Front Street Money Market Cl-A0.256.00.57%0.81%0.75%0.29%-0.41%1.10%
Renaissance Money Market0.51163.70.57%0.67%0.75%0.38%0.37%2.34%
CIBC Money Market0.511,740.20.56%0.66%0.73%0.37%0.36%2.50%
Integra Short Term Investment0.9518.50.55%0.62%0.78%0.34%0.57%2.39%
RBC Canadian Money Market0.552,787.20.52%0.65%0.68%0.33%0.58%2.95%
RBC Canadian T-Bill0.45671.90.51%0.57%0.67%0.36%0.28%2.31%
DEX Universe Bond Total Return Index6.43%5.71%9.67%6.74%5.41%6.41%
Source: Lipper

© 2007 The Globe and Mail. All rights reserved.

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