Way to Go Mutual Fund Companies in Canada
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Canadian Capitalist has a good post over at his site that talks about a recent study showing us that the “fees charged by the median fund in Canada is the highest among 18 countries covered by the study in every fund category.” This is amazing. Please check it out – but for those of you who are investing in these mutual funds – please continue to do so so that my IGM Financial shares can continue to keep going up!
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Mickey said:
I agree & disagree. We have higher MERs in Canada for one simple reason: Economies of Scale. Our mutual fund market is a fraction of a fraction compared to the US. If fund companies charged the US MERs, most of them would be out of business. But you still make a good point that we are expensive. I think a key point if you are a Canadian mutual fund investor is that you should pay attention to the MER but more importantly understand if the fund you are buying is highly active, meaning they do not resemble an index in any way. Otherwise, what’s the point in owning a fund when you can buy a cheaper ETF? There are not many funds in Canada that have managed to outpeform their proxy, I’d say about 15% or less do over the long run but they do exist.
Cheers!
Mickey
September 9th, 2009 at 10:34 pm -
Paul Jacobs said:
In addition to high MER’s I’ve noticed a disturbing trend among Canadian funds that involves the issuance of new shares with no or minimal compensation to existing share holders. One of the funds involved is the Dividend 15 fund which just put out a “Rights Offering” which increased the share float by 25%. The offering graciously allowed existing shareholders to purchase the offered shares, a Class A share plus a preferred share, for 19.75. When the offering was announced the Class A shares were trading at 12.21. The quote for these same shares on November 12 was $9.58. It isn’t possible to prove that the dilution of the shares is a result of the dilutive “Rights Offering”, but the correspondence between the percentage drop in value and the percentage dilution is sugggestive.
As at November 12 (1 day before the offer closes) the combined shares were available on the open market for $19.65 plus commission. It looks like the “Rights” are, in addition to being dilutive, worthless.
This dilutive offering was made available with no shareholder vote and only to Canadian shareholders. This suggests to me that this action is not legal in the US without a shareholder vote. I would suggest that it is immoral anywhere.
Another, operator that is proposing the same sort of thing is Mulvihill Capital. They apparently want to offer “Rights” on their World Financial Split fund. This information comes from their press release of November 10, 2009. See : http://www.mulvihill.com/sp_pressreleases.cfm?symbol=WFS_WFS.PR.A
This offering should double the number of shares outstanding. This offer is made particularly outrageous by the fact that they have stopped paying divdends on their Class A shares and will not resume divend payments unless the NAV increases from the current level of $3 to at least $5. I am not sure how that increase is going to happen in the face of a 100% dilution of the shares outstanding.
Sooo WAY TO GO Mulvihill.November 12th, 2009 at 1:06 pm
[...] Keep your costs of investing low. If you are in Canada like me, then you are totally getting hosed on mutual fund fees. Buy only low cost index funds or mutual funds. Don’t believe the myth of you get what you pay for – it DOES NOT apply to mutual funds. [...]