Insane Mutual Fund Fees
- 6 Comment
I was reading the latest edition of Canadian Moneysaver, which is a great magazine that is Canadian focused but would be of value to any type of investor from any country as it touches on many key investment and personal finance topics. In one of the sidebar boxes, they had a blurb about the fees paid to one of Canada’s largest mutual funds:
$291,117,000
Yup, you read that right. The Investors Dividend fund pulled in that much from fees. Ok, granted the fund has over $13 billion in assets but that is an insane amount of fees. You can’t tell me that it cost anything close to that to run the fund. The MER on the fund is 2.8% which is really high for any fund, I don’t care how specialized they are. What was the performance for this fund last year? Last year the fund earned 9.95% while the index did 11.47%. On a 3-year average basis, the fund had a return of 12.1% while the index did 16.65%. I would say that this fund did not earn its money! (*all returns provided by Globefund.com)
On the plus side of this for me, is that I own stock in IGM Financial which is the company that runs the Investor Group mutual funds. IGM’s reported first quarter profit was up 13% year over year. This company also continually raises its dividend year after year. I say keep the fees coming – I don’t invest in the fund but I reap the rewards.
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6 Comments on this post
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ThickenMyWallet said:
I am clearly in the wrong line of work… my May 15th post actually talks about the advantages of buying mutual fund companies vs. the mutual funds they manage.
http://www.thickenmywallet.com
Keep up the good work.
May 18th, 2007 at 3:34 pm -
Benoit Essiambre said:
Given that they’re not taking any risk since they invest other people’s money, how can this be justified!? Where’s the competition? I don’t get it.
May 9th, 2008 at 9:29 am
[...] Original post by The Dividend Guy [...]
[...] The Dividend Guy is rightfully scolding IGM’s Investors Dividend fund for milking $291,117,000 a year in mutual fund fees. I’m both proud and guilty of being an IGM Financial shareholder. I’m proud because IGM has been steadily increasing revenues, profit margins, earnings and dividends, while maintaining Return on Invested Equity above 20%, and decreasing debt levels. I’m guilty because the prosperity rides on back of investors’ ignorance. Let’s face it. By analyzing Investors Dividend’s top holdings, one can easily conclude that Investors Dividend fund is nothing more than a closet index fund with a tilt toward dividend paying stocks. Even an amateur like myself can assemble an index look-alike portfolio. Heck. Pay me 1/100th of $291,117,000, and odds are favouring me to beat this fund over the long-term. [...]
[...] The Dividend Guy is rightfully scolding IGM’s Investors Dividend fund for milking $291,117,000 a year in mutual fund fees. I’m both proud and guilty of being an IGM Financial shareholder. I’m proud because IGM has been steadily increasing revenues, profit margins, earnings and dividends, while maintaining Return on Invested Equity above 20%, and decreasing debt levels. I’m guilty because the prosperity rides on back of investors’ ignorance. Let’s face it. By analyzing Investors Dividend’s top holdings, one can easily conclude that Investors Dividend fund is nothing more than a closet index fund with a tilt toward dividend paying stocks. Even an amateur like myself can assemble an index look-alike portfolio. Heck. Pay me 1/100th of $291,117,000, and odds are favouring me to beat this fund over the long-term. [...]
[...] a very promising story, and is especially bad when you consider that in Canada we have the highest mutual fund fees in the world then the story gets even more [...]