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Article Archive: Funds

Ray Dalio's famous trade is sputtering
04/28/24   Funds
"The only time risk parity was really successful was at the time of the Great Financial Crisis and that was really its heyday."

Performance of the hedge funds
04/21/24   Funds
"confirmed prior research findings that hedge funds with results available on data vendors have been, in aggregate, poor investments, producing negative alphas and thus subtracting hundreds of billions of value from investor portfolios."

Diseconomies of scale
12/08/23   Funds
"We find that quant strategies are less plagued by diseconomies of scale compared to fundamental strategies."

Performance chasing
11/05/23   Funds
"First, investors are chasing past returns. But on average, funds that have great returns in the last five years tend to have poor returns in the next five years. That means that investors who chase past returns and put their money into the best performing funds of the last five years tend to underperform. How long do investors underperform? The red line in the chart indicates that fund managers have about five years before their investors turn their backs on them. After five years of underperformance, there is no stopping disappointed investors from leaving the fund. My personal experience with investors is that five years is a long time. Most investors will get nervous after six to twelve months of underperformance and leave you after two to three years of underperformance."

Solo vs. teams
04/30/23   Funds
"In other words, while the average single-manager hedge fund has better performance, individual funds can be at the very top or at the very bottom, depending on the decisions of the fund manager. Team-managed funds are in the murky middle, neither particularly good nor particularly bad."

Crispy bacon
01/15/23   Funds
"Being wedded to a benchmark by relative return fears, career risk, and investment mandates, in our opinion, practically guarantees a highly correlated and ordinary outcome. If the objective is to achieve higher returns with less risk, we do not believe looking like everyone else, or serving soggy bacon, is the answer. Bacon, in our opinion, should be served crispy."

Volatility laundering
01/08/23   Funds
"Given the massive popularity of private investing today, it may very well be true that, as a great man once almost said, 'Never have so many paid so much to so few for the privilege of being told so little.'"

Performance benchmarks
12/04/22   Funds
"Just like mutual funds, public pension plans and endowments are allowed to use benchmarks of their own choosing, typically referred to as custom or strategic benchmarks."

The survival game
10/16/22   Funds
"There is a major incentive problem at the heart of the asset management industry, where the interests of clients and the professional investors who run money for them are often poorly aligned."

Active fund selection is difficult
09/11/22   Funds
"For active investors, reducing fees paid is the easiest lever to pull to improve the odds of success."

Does turnover still matter?
06/12/22   Funds
"For professional fund managers, transaction costs have come down significantly as well and risk management tools have become more sophisticated and which may have reduced the relationship between portfolio turnover and fund returns."

Concealing volatility
06/05/22   Funds
"Don't listen to investment sales pitches which tell you to avoid the volatility of the public equity and debt markets, when they are taking the exact same risks in the private market, and they cannot or will not measure the risks for you, no matter how thick or thin the 'disclosure' document is."

The high cost of gender bias
03/08/22   Funds
"A new, global survey from BNY Mellon looked at the barriers faced by women investors. It concluded the industry is losing out on US$3 trillion in assets under management (AUM) by not making investing more accessible. More than 9-out-of-10 asset managers admitted they target their products to men and saw them as their target market."

The evidence mounts against active share
03/06/22   Funds
"Since the initial publication of research documenting active share, its advocates have clung to the belief that the metric could identify funds that would outperform. But the academic evidence has all but disproven that thesis."

Model portfolios
01/09/22   Funds
"On average, affiliated ETFs charged 6 bps higher expense ratios and generated 67 bps lower net year-to-date returns than unaffiliated funds (significant at the 1 percent confidence level). Their past performance, measured by the performance-rank percentiles over the previous one and three years, was also five and six ranks lower, respectively."

Picking funds and indices
01/09/22   Funds
"Unfortunately, the natural desire to allocate more money to better-performing asset classes turns out to be exactly the wrong instinct. While asset classes exhibit short-term (one-year) momentum, they tend to mean revert over the long term, as shown in the chart below."

Fees are your foe
11/21/21   Funds
"Investors shouldn't let their judgment be swayed by the Veblen effect, and instead should take another look at the question of fees, especially when they're couched as 'only 1%.' They may be surprised at how high active management fees really are - when framed in other ways"

Negative value-add
09/12/21   Funds
"Low-fee funds tend to have positive net value-added while high-fee funds have negative net value-added, suggesting, again, a systematic relation between net value added and percentage fees. However, in aggregate, the total net value added for the 'All funds (Index + Mutual)' sample amounts to a negative $125 billion USD. This number can be interpreted as a measure of the total economic value added or lost by the mutual fund industry for its investors."

Avoid 'breaking the buck'
09/05/21   Funds
"Why penalize those who exit in a crisis? They are causing the crisis. Liquidity is not a free good, and certainly not in a crisis. This will make them think twice about liquidating, because they will absorb a disproportionate amount of the loss."

Deferred sales charges banned
05/09/21   Funds
"The Ontario government is allowing the province's securities regulator to join the rest of Canada in banning early withdrawal fees charged by mutual funds."

Hedge fund performance fees
06/26/20   Funds
"Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures."

Dear fellow investors
04/17/20   Funds
"Let us start by saying that in our entire careers, we have rarely seen an opportunity to add as much long-term value for our investors as we do right now. This isn't to say that we believe that things will start getting better tomorrow, as we have no idea how this situation is going to play out over the next few weeks or months. But we do believe that the long term is what really matters in investing, and our confidence level is much higher for the longer term."

Mind the Gap 2019
08/19/19   Funds
"On the one hand, allocation funds produced a positive gap of 0.22% on annualized returns of 5.54%. A positive gap means a majority of the money going in was well-timed. The reasons are instructive about what works best for investors."

2018 Morningstar fee study
05/01/19   Funds
"Morningstar's annual fee study of U.S. open-end mutual funds and exchange-traded funds found that the asset-weighted average expense ratio was 0.48% in 2018, a 6% decline from 2017."

OSAM Q1 letter
04/13/19   Funds
"One of the best ways to evaluate a manager is to ask them about their research graveyard. Of the research projects we've pursued over the decades, a significant majority end up like the ownership data project - dead. The quantitative research process is default frustrating."

How hedge funds get rich
03/11/19   Funds
"However, what if I told you that in less than 20 years the hedge fund would have more money than you (regardless of the size of your initial investment)."

Mawer on sale
11/12/18   Funds
"Closely held Mawer Investment Management Ltd. has hired Bank of Nova Scotia to explore options such as a sale, following a wave of transactions involving Canadian money managers."

Lessons from Peter Lynch
09/17/18   Funds
"Multiple analyses have been performed with the purpose of deconstructing and explaining Lynch's success, and the conclusion seems to be that higher beta, momentum, and size were among the primary sources of Magellan's amazing performance."

Fake returns
09/06/18   Funds
"IRRs are meaningless and should never be used."

Chasing mutual fund performance
09/06/18   Funds
"So does performance chasing in the mutual fund universe deserve its less-than-stellar reputation? It depends. If the momentum strategy is systematically implemented, frequently rebalanced, and has low transaction costs, it can generate excess returns. But as a rule, performance chasing is best avoided. Our analysis indicates that investors would be better off betting on mean-reversion."

Chasing returns
04/22/18   Funds
"The authors illustrated how the probability that a talented manager's performance will exceed the best in a pool of untalented managers can be surprisingly small, even over long periods. It helps explain why performance-chasing has produced such poor results for individual and institutional investors alike."

The dead man fund
11/12/17   Funds
"William Steadman's four funds regularly appeared on fund-watchers' lists of the worst investments. By extracting from investors such high expenses, he had conned them within the limits of the law."

Institutional investors, just like us
06/18/17   Funds
"But what if you picked the top allocation per decade for the next decade, how would that do? ... It would reduce your return by 1.5% per year"

Index fund contrarian
05/07/17   Funds
"Global value investor David Winters takes on index funds, saying they are more expensive, less diversified and higher risk than commonly believed." [video]

O'Shaughnessy and O'Shaughnessy
03/26/17   Funds
"My guest this week is my father, Jim O'Shaughnessy. He was a pioneer in quantitative equity research, part of an early group of explorers who combed through data to find factors which predicted future stock returns." [audio]

DFA Funds and fees
03/12/17   Funds
"DFA adviser fees in some cases all but erase their advantages"

Risky risk ratings
01/15/17   Funds
"Over the past two years, I tracked risk rating changes for nearly 100 unique mutual funds and ETFs. 77% of those funds saw risk ratings reduced despite the fact that we're nearly 8 years into one of the longest bull markets in history for stocks and bonds."

The three coolest studies of 2016
12/11/16   Funds
"It appears that ETFs dropped portfolio returns by 1.1% annually even when they accounted for only a small portion of an investor.s portfolio."

Joel Greenblatt interview
11/06/16   Funds
"How do you prevent investors from buying and selling at the wrong time? Financial innovator and successful value investor, Gotham Funds' Joel Greenblatt explains his new hybrid approach combining indexing and his active long/short strategies." [video]

Sued over retirement plan fees
08/14/16   Funds
"The complaints allege that the universities, as the plan sponsors, failed to monitor excessive fees paid to administer the plans and did not replace more expensive, poor-performing investments with cheaper ones. Had the plans eliminated their long lists of investment options and used their bargaining power to cut costs, the complaints argue, participants could have collectively saved tens of millions of dollars."

Curse of the benchmarks
04/02/16   Funds
"Indeed, benchmark requirements coupled with short-term horizons, ironically, serve as poison for investors who allocate to active funds. The only solution is to marry active strategies with investors who are educated and can internalize the fact that sustainable active investing has to be difficult."

Chasing returns
02/21/16   Funds
"The indexes show strong performance leading up to the ETF launch (or more accurately, until 6 months before launch, when the decision to launch the ETF was probably made). Next the evidence shows that on average, ETF performance subsequent to launch tends to be ... average."

Sequoia sued over Valeant stake
01/16/16   Funds
"The investment firm that runs the Sequoia Fund, long known for its ties to Warren Buffett, was sued by shareholders who claim it recklessly took a huge stake in embattled drug company Valeant Pharmaceuticals International Inc, causing more than $2 billion in losses."

Revealing the closet indexers
11/28/15   Funds
"The problem with closet indexing is that you wind up paying substantial fees for a fund that delivers little in the way of independent investing judgment. The extra charge - compared to what you could pay for a plain-vanilla exchange-traded fund that cheaply and efficiently tracks the same index - typically amounts to somewhere between one and two percentage points a year."

No place for 1.75% trailer fees
11/07/15   Funds
"In fact, some go as high as 1.75%, prompting some within the industry to wonder why regulators don't cap trailers - if not ban them outright."

Alpha wounds
07/30/15   Funds
"Chief among the alpha wounds is that the benchmark tail wags the portfolio management dog. What I mean is that benchmarks were supposed to be the foundation for understanding a portfolio manager's performance after the fact. Instead the investment industry evolved so that benchmarks are now the navigational compass for investment managers before the fact."

Advisors behaving badly
03/20/15   Funds
"Investors should similarly watch out for advisors changing firms or recommending moving portfolios to segregated funds or other DSC mutual funds that may trigger a new set of commissions. (New DSC purchases will also have you pay a fee to exit the funds within the next 6-7 years.)"

Cliff Asness interview
03/01/15   Funds
"In a far-ranging 90 minute conversation, we discuss everything from value to momentum to the small cap effect. We also discuss the Efficient Market Hypothesis, how and why markets can be irrational, and what it was like to be part of the Quant Flash Crash of 2007. If you are interested in what quants actually do, be sure to check out the podcast portion when its posted."

No new bets in 80 years
03/01/15   Funds
"Equity investors pursuing a buy-and-hold strategy might want to check out a fund that hasn't made an original stock market bet in 80 years. The Voya Corporate Leaders Trust Fund, now run by a unit of Voya Financial Inc bought equal amounts of stock in 30 major U.S. corporations in 1935 and hasn't picked a new stock since."

Doubling down
11/23/14   Funds
"With a sample from 1/1990 to 12/2013, the paper finds that a portfolio formed of the positions that fund managers add to after recent stock-level underperformance generates significant annualized risk-adjusted outperformance of between 5% to 15% (Table below shows the monthly performances). Double down portfolios perform best with around a 6 to 9 month holding period."

Index-linked notes: buyer beware
11/08/14   Funds
"I'm reminded of the knowledge gap every time I open the newspaper, or walk by a bank branch, and see an ad for an index-linked GIC. Despite intense industry criticism, these products remain in vogue and are heavily promoted by the banks."

Curiosity killed the copycat
10/26/14   Funds
"The funds that get copied, unsurprisingly, are typically those that have performed well in the past and are highly ranked by Morningstar. In the short term, the strategy appears to work; the copycats manage to improve their performance and the copied funds continue to do well. But over a longer period of four years or so, this effect disappears."

The Peculiar Passivity of Active Management
08/29/14   Funds
"If active stock-pickers are going to prove their worth, they'd better start getting a lot more active - not by trading more, but by looking different from the indexes they are trying to beat."

The lure of hedge funds
04/19/13   Funds
"Investors often buy what they think is exciting, sophisticated, and complex with the embedded assumption that all of these attributes will lead to greater returns. We see this today where we witness the continued explosive growth of hedge funds. But, a careful examination of the data reveals that these fancy lures fail to hook as much in excess, after-fee returns as more time tested strategies."

Why investors lag funds
02/16/13   Funds
"Big surges and big declines spur greed and envy, then fear and anger. The more emotional an investor, the worse his decisions will be. The past two bear markets are perfect examples. Some people bought stock funds heavily prior to the bear markets only to see their investments plunge. Then they bailed close to the bottom only to miss big rebounds. Not everyone did that, of course--many were patient--but flow data tell us too many went in the wrong direction."

He's not a billionaire, he just plays one on TV
09/29/12   Funds
"'[O'Leary's] stated investment philosophy was at odds with what they are doing,' says Hallett. 'My basic conclusion was there was a lot more marketing than real investment steak.' When asked whether he would invest with O'Leary Funds today, Hallett said, 'There are no funds they have that really jump out at me.'"

How Eric Sprott got solar burn
08/31/12   Funds
"The story of Timminco - which concluded early this year with the bankruptcy of the company and the delisting of its stock on the TSX - has, since its beginning, inspired doubters and believers. The company never delivered on its promise to produce cheap solar-grade silicon on a commercial scale. The believers maintain Timminco never got the chance to prove itself because the solar industry collapsed and demand for high-purity silicon dried up almost overnight. The doubters insist the company could never have made the breakthrough."

Third Avenue is buying HK real estate
07/20/12   Funds
"Wolf started buying up Centro's distressed debt at less than 60 cents on the dollar late last year, while it was still in bankruptcy. The debt was converted to equity, and now Third Avenue owns more than 13.8 million shares of the new company."

Funds vs. ETFs
07/07/12   Funds
"The question is, would these studies arrive at a different conclusion if mutual funds were compared to ETFs instead of uninvestable indexes? It's hard to say definitely without getting into the data, but a rough assessment based on the Vanguard numbers would suggest that Canadian equity ETFs would still be leading an albeit closer race. If a charge for investment advice was factored in, it would be a dead heat, with some categories going to ETFs and others to mutual funds."

Investors prefer ethical ETF
07/05/12   Funds
"Of course, what those standards actually are is a complex question, which is why it is important investors make sure they understand the parameters used to make such judgments, Mr. Rothery said. 'I'd caution anyone thinking about buying one of these funds to make sure that your morals and ethics correspond with that of the fund,' he said. 'It can be very tricky.'" [Please ignore the 'financial advisor' reference, it was a holdover from my days working for Dan Hallett. I don't take on private clients these days.]

Why Mutual Fund Boards Are Failing
06/21/12   Funds
"But while individual qualifications are rarely an issue, investor advocates say mutual funds allow far too many directors to serve on multiple boards. In the realm of public companies, people can draw criticism for sitting on more than a handful of boards. But YieldPlus's trustees, in 2010, each served on the boards of 72 other Schwab funds -- each with its own lengthy prospectus, regulatory filings and compliance issues to review. And that, it turns out, is nothing compared with Bruce Crockett's responsibilities on behalf of investors in the Invesco family of funds. Crockett, a former CEO of satellite company Comsat, is a shareholder watchdog for 140 stock and bond funds, roles for which he was paid $693,500 in 2011. For many critics, vetting so many funds is hard to fathom and is a prescription for overwhelmed and passive boards. 'Maybe we're just not as smart as they are,' says Steven Melnyk, a former ABC golf commentator-turned-investment banker, who says he has his hands full serving on three fund boards at Longleaf Partners. 'But I can't imagine how, if you're at a large fund complex, you could find the time to really review everything you need to look at.' The required reading alone, says John Bogle, founder of fund giant Vanguard, underscores the challenge. 'Mutual fund directors,' he says, 'are either not being paid nearly enough for what they should be doing -- or far too much for what they actually do.'"

When Julia tried to start a business
05/11/12   Funds
"Last week, the Obama Administration released a campaign piece about the life of Julia, showing how Julia benefited from taxpayer largess and oversight by the state at many points in her life. But the campaign piece was incomplete, and missed the part where Julia attempted to start her own business. Long before she started a web business out of her home, she tried to start a retail business."

Lessons learned in the wealth management
04/14/12   Funds
"The investment industry has the attention span of a 4-year-old. Two of its key drivers - compensation (fees and commissions) and past performance (what's done well recently) - lead to changing strategies and a steady stream of new products. Unfortunately, this hyperactivity kindles clients' psychological need to take action (especially males). It makes a "stay the course" strategy, which is often the best option, difficult to maintain."

Another look at the performance of active funds
02/27/12   Funds
"In this study we evaluate the performance of actively managed equity mutual funds against a set of passively managed index funds. We find that the return spread between the best performing actively managed funds and a factor-mimicking portfolio of passive funds is positive and as large as 3 to 5 percent per annum. Our findings are inconsistent with the view that active funds have little or no incremental economic value over low-cost index funds."

Mutual funds vs ETFs
01/16/12   Funds
"The market share lost by mutual funds is not surprisingly shifting to ETFs. ETF fees tend to be lower, yet they provide better liquidity and the ability to time the market, including intraday trading. That makes ETFs appealing not just to retail investors, but to institutions as well."

Hedge-fund performance and liquidity risk
09/08/11   Funds
"This paper demonstrates that liquidity risk as measured by the covariation of fund returns with unexpected changes in aggregate liquidity is an important predictor of hedge-fund performance. The results show that funds that significantly load on liquidity risk subsequently outperform low-loading funds by about 6.5% annually, on average, over the period 1994-2009, while negative performance is observed during liquidity crises. The returns are independent of share restriction, pointing to a possible imbalance between the liquidity a fund offers its investors and the liquidity of its underlying positions. Liquidity risk seems to account for a substantial part of hedge-fund performance. The results suggest several practical implications for risk management and manager selection."

Who got the margin call?
08/08/11   Funds
"The market is not puking. Some prime broker is puking the stocks held by one or more very large hedge funds. So lets play the game: guess who got the margin call!"

07/18/11   Funds
"Among the index-beaters, Mawer Canadian Equity, which is run by Jim Hall of Mawer Investment Management Inc., led the way with a 7.1-per-cent gain. Mr. Hall has been cautious on commodity stocks, a stance that helped his fund gain 8.5 per cent for the first six months of this year. A common thread among many of the outperformers was low fees, with most charging well below 2 per cent."

Fund facts risk and suitability get thumbs-down
07/16/11   Funds
"A new regulatory initiative - i.e. Mutual Fund Point of Sale - was launched this year in an attempt to better inform investors about the investment funds in which they invest. The key feature of this Point of Sale initiative was to provide an investor-friendly 2-4 page document called Fund Facts summarizing each fund's most important information. The idea was based on the observation that only a tiny minority of investors ever read a fund's simplified prospectus (i.e. the document that lays out all of a fund's details). There was no shortage of opinions on this Point of Sale initiative - a collaboration of various financial regulators - while it was in the planning stages. (Including one from yours truly.) But now the first stream of Fund Facts documents have been rolled out and a central repository has been set up at to house some documents. Unfortunately, Fund Facts continues to suffer weaknesses in the two most important areas for investors and their financial advisors."

A free checkup for low-cost investors
07/09/11   Funds
"Here's some free advice for you. If you're interested in building a portfolio with low-cost mutual funds, you can sometimes get ongoing investment advice at no extra charge. Wondering how much you should invest in stocks and bonds, or how much global diversification you should have? This is exactly the kind of free advice that is available when you buy funds directly from Leith Wheeler Investment Counsel, Matco Financial, Mawer Investment Management, Phillips, Hager and North and Steadyhand Investment Funds."

The Paulson Sino Forest loss
06/27/11   Funds
"The shortcuts we use as portfolio managers (and these are often sophisticated shortcuts born from some deep understanding of the industry) can make even the best portfolio manager susceptible to fraud."

Income funds' payout sustainability 2
06/03/11   Funds
"Earlier this year, I wrote about how to gauge the sustainability of monthly income funds' fat distributions so that investors and advisors could make better decisions and set realistic expectations. Since then, I've received a steady stream of phone calls and emails, mostly expressing concern over many funds. However, one fund in particular keeps popping up in such inquiries, so I thought it was deserving of its own blog post. Perhaps I shouldn't be surprised by the continued interest in such funds but I am. Individual investors, financial advisors and industry regulators have contacted me to solicit my views on T-series or monthly income funds - both in general and for specific funds. Over the past five months, the one fund that has been most frequently mentioned is the RBC Managed Payout Solution - Enhanced Plus. So, let's take this through our test for distribution sustainability."

Closet indexing, fees, and performance
05/11/11   Funds
"Mutual fund investors face a basic choice between actively-managed funds and index funds with lower expenses. However, the prevalence of indexing is rare in most countries. Rather, actively managed funds in many countries engage in "closet indexing," choosing portfolios that closely match their declared benchmark. The degree of explicit indexing in a country is negatively related to fees, while "closet indexing" is positively associated with fees and negatively with performance. The most actively managed funds charge higher fees but outperform their benchmarks after expenses. The degree of indexing and the ability of active managers to outperform are both associated with competition and fees."

Negative fee fund
02/27/11   Funds
"Those performance fees have led to another distinguishing characteristic for two of Bridgeway's funds: Bridgeway Micro-Cap Limited has an expense ratio of zero, while the recently reopened Bridgeway Aggressive Investors 1 has a negative 0.51 percent expense ratio - it pays investors $5.10 for every $1,000 they have invested in it."

Economic Meltdown Looming
02/20/11   Funds
"Bob Rodriguez says the U.S. has seven months to implement significant budgetary reductions or face tipping point"

Putting monthly distributions to the test
01/14/11   Funds
"I don't make many bold predictions. But nearly a decade ago I did just that. I challenged the most popular monthly income mutual fund of the day, now known as IA Clarington Canadian Income. I stated that this balanced fund's 10% distribution rate at the time could not be sustained and would have to be cut. No recommendation has ever caused me such grief. I received angry phone calls and e-mails. But I turned out to be right. Fast forward to 2011. In today's Global and Mail I take readers through a process for testing whether an investment's monthly cash payout can continue longer-term. It's the same process I used to make my Clarington prediction in 2001. While Clarington and some other firms have adopted more flexible distribution policies, several funds continue to sport unsustainable cash payouts. And I use a popular big bank fund to illustrate our distribution sustainability test in today's article."

Active Share
12/19/10   Funds
"Active share can have a direct influence on returns. Looking at U.S. stock fund performance in the 20 years ending 2009, Prof. Petajisto found that the most active stock pickers beat their benchmarks by 1.26 percentage points annually after fees. On average, funds with lower active share didn't beat their benchmarks."

The megamind of Miami
12/12/10   Funds
"As he nears the end of his morning walk, Berkowitz begins musing on his aversion to losing money. He is not, he insists, interested in taking risks. His contrarian investments may look perilous to outsiders, but to him they are the safest opportunities he can find. He stops and shuffles to the dotted yellow line in the center of the street and points down: 'This is where we can make our shareholders plenty of money.' For Berkowitz, out of the ordinary is middle-of-the-road."

But still expensive
08/22/10   Funds
"A few years ago, a research paper by three academics claimed that Canadian mutual funds levied higher average fees than funds in seventeen other countries. Since average Canadian fund fees are high, the media jumped all over this research - despite being incomplete. Reading through many versions of the paper, it became clear that the core data and underlying assumptions were questionable."

Stewardship common sense
07/16/10   Funds
"In the course of our research we've uncovered a fund company - one that received a good culture grade and had no regulatory deductions - that purchased shares in a related company in one of its funds. Since the firm has followed all of the rules, technically, it's not considered a regulatory issue. Accordingly, the trade was not reviewed by the IRC. But when we discovered all of the facts, we have zero doubt that a conflict of interest existed, whether or not the law defines it as such."

Reward for punishment
03/20/10   Funds
"Short-term redemption fees may prevent investors from frequently trading in and out of mutual funds, which results in an implicit wealth transfer from long- to short-term fund investors. This paper studies the impact of short-term redemption fees of various structures on long-term fund performance. We observe that fund performance is increasing in the magnitude of the fee and the time period during which an investor would be subject to it. Redemption fees are associated with up to a 327 annualized basis point increase in average abnormal returns."

Keys to success
01/12/10   Funds
"Berkshire has really figured out how to behave with large insurance exposures that could potentially pay out billions from catastrophic events. There is a huge benefit to having so many non-insurance operating businesses affiliated with their insurance businesses, especially large utilities and railroads, where you are highly confident that you are not going to take a big hit. You can't have a bunch of operating businesses that could potentially lose much and also face a Katrina or a Wilma. That's where you have brilliance."

Currency-neutral trap
01/04/10   Funds
"Over the past 4 years, XSP has trailed the returns of IVV by an annualized rate of 2.99%. A Canadian investor betting that the C$ would appreciate against the USD and opting XSP over holding IVV directly would have been right on the first count but made no money on the bet. The C$ appreciated at an annualized 2.73% against the USD but the tracking error of XSP wiped out all the gains."

Excess cash and mutual fund performance
12/16/09   Funds
"I document a positive relationship between excess cash holdings of actively managed equity mutual funds and future fund performance. The difference in returns of portfolios of high and of low excess cash funds amounts to over 2% annually, or approximately 3% after standard risk adjustment. I study whether this difference in performance can be explained by the differences in managerial stock selection skills, market-timing abilities, fund liquidity needs, and operating costs. I show that managers of high excess cash funds make more profitable stock purchasing decisions, while low excess cash fund managers make better sell decisions. Neither high nor low excess cash groups exhibit significant market-timing skills; however, funds with volatile excess cash holdings are successful market timers. The difference in returns between high and low excess cash groups is particularly pronounced during periods of low fund flows, suggesting that high excess cash funds are better able to anticipate fund outflows. Finally, I show that high excess cash funds incur significantly lower operating expenses than do their low excess cash peers. I additionally document new important determinants of mutual fund cash balances, showing that funds with riskier or less liquid shareholdings, as well as those with higher return gap measures hold more cash. The determinants I consider jointly explain three times more cross-sectional variation in cash positions than variables studied in prior literature."

Investor timing ability
10/20/09   Funds
"We examine the timing ability of mutual fund investors using cash flow data at the individual fund level. Over 1991-2004 equity fund investor timing decisions reduce fund investor average returns by 1.56% annually. Underperformance due to poor timing is greater in load funds and funds with relatively large risk-adjusted returns. In particular, the magnitude of investor underperformance due to poor timing largely offsets the risk-adjusted alpha gains offered by good-performing funds. Investors in both actively managed funds and index funds exhibit poor investment timing. We demonstrate that our empirical results are consistent with investor return-chasing behavior."

Take off the blinders
10/18/09   Funds
"In the mad dash to buy bond funds -- about $200 billion so far this year -- investors are overlooking fees. Most of the new bond money is going not into dirt-cheap index funds, but into far more expensive, actively managed portfolios. The average annual cost of owning a taxable bond fund, according to Morningstar, is 1.03% of invested assets, with a maximum of 2.98%. In a world of 3% to 4% Treasury yields, with the risk of losses if interest rates rise, those fees loom large."

High turnover could be a red flag
08/18/09   Funds
"Perhaps most significantly, funds that trade a lot can be hard on investors' wallets. That's because a fund incurs transaction costs each time its manager buys or sells a stock. Not only do funds pay commissions to buy and sell, but they also incur so-called market-impact costs. Large funds rack up market-impact costs because it might take them a while to buy or sell securities; as they're doing so, they may ultimately obtain a less advantageous price than a smaller, more nimble fund would receive. Shareholders ultimately foot the bill for these costs through lower net returns."

Are funds pawning shares at your expense?
06/01/09   Funds
"Your fund should lend out your securities, but the proceeds should go to you. And fund managers should reinvest the collateral only in absolutely safe securities. The current system, where they keep half the gains and stick you with all the risks, has got to go."

The manager who gave back his fees
04/02/09   Funds
"The mutual fund industry is going to hate this. Investors will be angry that they don't see more of it. Unhappy at the returns he has generated for clients, money manager Francis Chou is refunding almost all the management fees collected by his Chou Europe fund since it opened for business in September, 2003."

Fund industry against Ontario tax proposal
03/16/09   Funds
"Canada's mutual fund industry is concerned a proposal to harmonize the province's sales tax with the federal GST would unfairly punish the industry and investors who use its products."

Higher risk, lower returns
03/09/09   Funds
"This study makes a critical distinction between the returns of hedge funds and the returns of investors in these funds. Investor returns depend not only on the returns of the funds they hold but also on the timing and magnitude of their capital flows into and out of these funds. The capital flow effect exists for any investment but is especially relevant for hedge funds because of the large magnitude and variation in the associated capital flows. We use dollar-weighted returns (a form of IRR) to assess the properties of actual investor returns on hedge funds and compare them to buy-and-hold fund returns. Our first finding is that annualized dollar-weighted returns are on average about 4 percent lower than corresponding buy-and-hold fund returns. This performance gap rises to as much as 9 percent for "star" funds with the highest buy-and-hold returns and for funds with high volatility of capital flows, a remarkable difference in assessing long-run investment performance. In addition, dollar-weighted returns are below comparable returns for broad-based stock indexes. Our second finding is that dollar-weighted returns are more variable than their buy-and-hold counterparts. The combined impression from these results is that the return experience of hedge fund investors is much worse than previously thought."

Fund manager reports
03/02/09   Funds
"Mutual fund managers' quarterly letters, market commentaries, forecasts, and other reports are full of interesting tidbits and, if one looks carefully, investment ideas. Every quarter, mutual funds are required to publish reports, and many portfolio managers, research chiefs, and advisors take the time to express their opinions about the markets, individual stocks, or other items on their minds. Some fund shops publish more frequently--on a monthly or even weekly basis."

The charges laid against us
01/31/09   Funds
"How much of Buffett.s $62bn would be the property of Buffett Investment Management and how much the property of the Buffett Foundation? The - completely astonishing - answer is that Buffett Investment Management would have $57bn and the Buffett Foundation $5bn. The cumulative effect of 'two and twenty' over 42 years is so large that the earnings of the investment manager completely overshadow the earnings of the investor. That sum tells you why it was the giants of the financial services industry, not the customers, who owned the yachts."

The man who made too much
01/07/09   Funds
"Hedge fund manager John Paulson has profited more than anyone else from the financial crisis. His $3.7 billion payday in 2007 broke every record, and he made it all by betting against homeowners, shareholders, and the rest of us. Now he's paying the price."

Hedge funds ruined by withdrawal limits
01/06/09   Funds
"In any investment business, the return of capital is far more important than the return on capital. By forcing investors to keep their money tied up during a bad year, the hedge funds are damaging their own reputation, and it may well never recover."

The ponzi scheme in every hedge fund
01/06/09   Funds
"Suppose some investors decide to withdraw their money from a hedge fund. The fund must liquidate the appropriate amount of its assets to pay these investors. Say the fund holds large positions in illiquid assets. The fund cannot immediately sell these assets, except at a fatal loss, so it would sell its more liquid assets. Given that the fund is more likely to inflate its estimation of the illiquid assets, it would seem that investors who withdraw early get the better returns over that time period."

The go-go investor
01/02/09   Funds
"his was a boom-and-bust story. He got rich in the process but also became the symbol of an era, in much the same way that Michael Milken became the symbol of the junk-bond-fueled excesses of the 1980s and Henry Blodget the symbol of the Internet bubble. Afterward, the portrait that was painted of him was not flattering. And it bugged him."

Time to ditch the style box
11/08/08   Funds
"Looking over the last 15 years, the style box is very correlated with itself. The lowest correlation is 75%, between largecap value and smallcap growth. That is not a reason to categorize managers; the difference between the average largecap value and growth manger is teensy. It is even true between largecap value and smallcap growth. And in more recent years, the correlations have been tightening to nearly 90% at worst."

Beware ETNs
09/24/08   Funds
"Perhaps this might be a good time for a story to remind your readers about the difference between an ETN and ETF: an ETN is just a pre-paid forward contract, a form of debt security. There is no underlying basket of assets, unlike mutual funds or ETFs."

Beware ETNs, Part 2
09/24/08   Funds
"This alone makes it very dangerous to buy an ETN: you're taking a huge amount of counterparty risk and not being paid for it at all. If this had happened a couple of years ago, I might have suggested a monoline wrap to set investors' fears at rest."

Hedge fund returns money
09/22/08   Funds
"The best-performing hedge fund manager of the past two years has closed down his funds and is returning money to investors after concluding that the danger of losing money from a bank collapse is too high."

Money market fund says customers could lose money
09/17/08   Funds
"The fund said that because the value of some investments had fallen, customers now have only 97 cents for each dollar they had invested. This is only the second time in history that a money market fund has 'broken the buck' - that is, reported a share.s value was less than a dollar."

Running a hedge fund is harder than it looks
08/19/08   Funds
"Do you remember a time, only a short while ago, when virtually anybody could start a hedge fund? It seemed so easy: billions of dollars were being thrown around like confetti, even at first-time managers. You could make money with your eyes closed. Or so it seemed."

Manulife shows Mawer love
08/07/08   Funds
"Mawer is that rarity in the mutual fund industry, a company that does everything well, whether it be Canadian equity, U.S. and international equity, balanced or bond funds. You've probably never heard of Mawer, but Manulife certainly has. Just recently, it introduced a new lineup of Mawer-managed funds that are sold by Manulife agents. Announcements like this aren't rare in the fund industry. Many insurers strike deals in which they stick their names on funds run by smart outside firms. What's different here is the marketing fuss that Manulife is making over its new lineup of Mawer funds. You'd almost think Warren Buffet himself was on board."

John Templeton dies at 95
07/08/08   Funds
"John Templeton, the billionaire U.S. philanthropist who made his fortune as the pioneer of global investing in the postwar boom, has died. He was 95."

America's hottest investor
06/12/08   Funds
"Henry, himself a long-time shareholder in Heebner's funds, says what first impressed him about Heebner was a little gambit he had going in finance class. Classmates would bring him silver dollars, which Heebner would exchange for dollar bills. Says Henry: "Ken was hoarding silver dollars on the idea that silver was going to keep appreciating, which would eventually force the Treasury to stop issuing new silver coins." And that's exactly what happened. "It was funny as hell - he'd be sitting there with piles of silver dollars on his desk - but Ken had it nailed," Henry says. "He saw something the rest of us didn't. That's Ken - that's always been Ken." Asked about the silver dollars, Heebner smiles and reveals that it was more than a lark for him. At one point he'd accumulated 13,000 silver dollars and had even taken out a bank loan to help finance his little venture. "The Treasury had these uncirculated silver dollars in bags in vaults. You could walk in with a thousand dollars, and they'd give you a bag of 1,000 silver dollars." It's still the best deal he's ever seen, he says: "You couldn't lose, but you could make a lot." Heebner figures he eventually netted around $15,000, but he was less successful when he tried to parlay his experience into a term paper about why silver prices were going up: "I didn't get a very good grade.""

The folly of short term performance
05/29/08   Funds
"Investors often buy funds based on past performance, especially of the short-term variety. This is in part human nature--behavioural finance types might attribute it the tendency all of us have to try to impose order on chaos, even if it means attributing meaning to small patterns where there may be none. It may also be a matter of convenience--getting reliable information about fund holdings, management, and organisational factors such is incentive pay can be difficult. In the face of that difficulty, investors tend to place more weight than they should on easily available factors, such as short-term past performance."

Catch two-and-twenty
05/22/08   Funds
"But suppose that every institution handed its portfolio to hedge-fund managers. The average fund manager cannot earn more than the market. After costs, he must earn less. An individual pension fund or endowment might succeed in its search for higher returns. But because hedge funds and private-equity fees are higher than normal - often a 2% annual fee and a 20% performance fee - the effect of the shift would be to lower the average return of investors, not increase it. A 'catch two-and-twenty' is at work."

Why today's hedge fund industry may not survive
04/27/08   Funds
"The immediate response may be that so naked a scam is inconceivable. Well, imagine a fund that leverages investors. money by borrowing massively in short-term money markets in order to purchase higher-yielding paper. Assume, again, that the premium gives a correct estimate of the risk. With sufficient leverage, this fund, too, is likely to make profits for years. But it is also very likely to be wiped out, at some point. Does this strategy sound familiar? It certainly should by now."

Investing is about stacking the odds in your favour
03/09/08   Funds
"I go to the office in search of one thing. An asymmetric bet. In other words, an investment or business strategy where, in my judgment, there is limited downside if it doesn't work, and big upside if it does. That is an investment manager's Holy Grail. In searching for such a situation, you won't see an investment professional buying a 'risk-free' investment, other than a government bond. That's because 'risk-free' or principal protected securities, are an asymmetric bet in the wrong direction. The odds are stacked against the purchaser."

Money for old hope
02/28/08   Funds
"Under the normal rules of capitalism, any industry that can produce double-digit annual growth should soon be swamped by eager competitors until returns are driven down. But in fund management that does not seem to be happening. The average profit margin of the fund managers that took part in a survey by Boston Consulting Group was a staggering 42%. In part, this is because most fund managers do not compete on price. Instead, they persuade their clients to select their funds on the basis of past performance, even though there is little evidence to show that this is a good predictor of future success. Nor can investors be sure that the intermediaries who sell the funds - brokers, advisers and bankers - will steer them in the right direction. These middlemen often get a cut of the fund managers' fees, so they have little interest in recommending low-cost alternatives."

Dark days for hedge fund king
02/25/08   Funds
"The steep losses have dealt a major blow to Asness, a University of Chicago-trained mathematician whose investing prowess catapulted him into the ranks of the super-rich, and his firm. Founded a decade ago with fellow Goldman Sachs alumni, AQR now faces the daunting prospect of employee defections, falling management fees, and credit problems."

The code breaker
12/20/07   Funds
"Simons, standing just under 5 feet 10 inches tall and weighing 185 pounds (84 kilograms), has trod an unlikely path. A former code cracker for the U.S. National Security Agency, in 1968 he became chairman of the mathematics department at Stony Brook University, part of the New York state university system. He built the department into what David Eisenbud, former director of the Mathematical Sciences Research Institute in Berkeley, California, calls one of the world's top centers for geometry. In 1977, frustrated with a math problem and eager for change, he abandoned academia to start what would become Renaissance, hiring professors, code breakers and statistically minded scientists and engineers who'd worked in astrophysics, language recognition theory and computer programming."

Investor timing and fund distribution channels
12/06/07   Funds
"We find that investors who transact through investment professionals using conventional distribution arrangements experience substantially poorer timing performance than investors who purchase pure no-load funds. Investors in all three principal load-carrying retail share classes (A, B, and C) significantly underperform a buy-and-hold strategy. Among all load funds, Class B investors suffer from the poorest cash flow timing, underperforming a buy-and-hold strategy by 2.28% annually, compared with annual underperformance of 0.78% for investors in pure no-load funds. No-load index funds are the only funds found to show no evidence of poor investor timing. Although investors are ultimately responsible for their own investment choices, these findings question the value being added by investment professionals who sell mutual fund shares through conventional distribution arrangements."

Chasing performance hurts load fund investors
12/06/07   Funds
"We find that investors who transact through investment professionals using conventional distribution arrangements experience substantially poorer timing performance than investors who purchase pure no-load funds. Investors in all three principal load-carrying retail share classes (A, B, and C) significantly underperform a buy-and-hold strategy. Among all load funds, Class B investors suffer from the poorest cash flow timing, underperforming a buy-and-hold strategy by 2.28 percentage points annually, compared with annual underperformance of 0.78 percentage points for investors in pure no-load funds. No-load index funds are the only funds found to show no evidence of poor investor timing."

The blow-up artist
10/11/07   Funds
"On a wall opposite Victor Niederhoffer's desk is a large painting of the Essex, a Nantucket whaling ship that sank in the South Pacific in 1820, after being attacked by a giant sperm whale, and that later served as the inspiration for 'Moby-Dick'. The Essex's captain, George Pollard, Jr., survived, and persuaded his financial backers to give him another ship, but he sailed it for little more than a year before it foundered on a coral reef. Pollard was ruined, and he ended his days as a night watchman. The painting, which Niederhoffer, a sixty-three-year-old hedge-fund manager, acquired after losing all his clients' money - and a good deal of his own - in the Thai stock market crash of 1997, serves as an admonition against the incaution to which he, a notorious risktaker, is prone, and as a reminder of the precariousness of his success."

Scale effects in mutual fund performance
07/10/07   Funds
"Our study examines the role of trading costs as a source of diseconomies of scale for mutual funds. We estimate annual trading costs for a large sample of equity funds and find that they are comparable in magnitude to the expense ratio; that they have higher cross-sectional variation that is related to fund trade size; and that they have an increasingly detrimental impact on performance as the fund's relative trade size increases. Moreover, relative trade size subsumes fund size in regressions of fund returns, which suggests that trading costs are the primary source of diseconomies of scale for funds."

A legend sizes up the market
06/15/07   Funds
"Miller remains one of the sharpest, most innovative thinkers in the investing game, as we were reminded during a recent interview at Legg Mason's headquarters, next to Baltimore's striking Inner Harbor. Miller is particularly impressive when he argues about the foibles of most value investors and defends his own approach. In the late 1990s, he was criticized for being a value investor in name only because he owned shares of AOL, Dell and Today, his big stake in Google once again leads some to question his credentials as a bargain hunter."

Monte Carlo may be answer to closet indexing
06/08/07   Funds
"Performance evaluations can be unsatisfactory when basing them on peer groups because a manager can beat one group while underperforming another. A further drawback is that it can take years, even decades, to determine whether a manager's results reflect skill or luck. Only the likes of Warren Buffett possess such patience. Ronald Surz, president of San Clemente, California-based software company PPCA, has a possible solution for investors who want to measure performance and still escape what Montier calls 'the tyranny of the benchmark.' He recommends using Monte Carlo simulation to construct multiple scenarios that show where an individual money manager falls among a distribution of thousands of possible investment outcomes."

Cundill's quest for hidden value
04/21/07   Funds
"Cundill Investment Research, which is owned by fund industry giant Mackenzie Financial Corp., is noted for a strict value approach that means it only buys stocks it believes are trading for less than they're worth. "We buy what everybody else is selling," Mr. Burton said. "That's where we start our search.""

TERs: Another fund cost to consider
04/14/07   Funds
"It's called the trading expense ratio, or TER, and it tells you how much your funds are spending to cover the cost of brokerage commissions for buying and selling stocks. People typically determine how much it costs to own a fund by looking at its management expense ratio, or MER. But trading expenses can be a key component of fund costs, and they're not reflected in the MER."

How did investors really do?
12/01/06   Funds
"There were a few bright spots. All of the fund categories that mix stocks and bonds posted 10-year investor returns that nearly matched or even outpaced their total returns. Investor returns for bond funds also tended to stay within close proximity of their total returns."

Saxon finds value in oilpatch juniors
09/13/06   Funds
"What they "keep doing" is in fact bottom-up, value-oriented investing. Sector weightings are "serendipitous" as a result, explains Tattersall. They employ a variety of measures of value; price-to-book was the key measure at inception, he recalls, but they are relying much more these days on standard measures of cash flow. Their value style translates into overweight in industrials, underweight in technology - and no gold stocks. The key, he concludes, is not so much what they own as what they don't own."

Is seg fund security worth the high cost?
07/11/06   Funds
"In most cases a segregated fund will mimic a regular mutual fund. You name the asset class and it's likely there are several mutual fund companies with a corresponding segregated fund. When it comes to MERs, the difference between segregated funds and their twin non-segregated fund is often huge."

Protectednotes may leave you exposed
07/11/06   Funds
"Principal-protected notes (PPNs) have long been one of those "have your cake and eat it too" financial products that -- in my view anyway -- just didn't cut it for average investors."

Who cares about fund categories?
06/22/06   Funds
"Investor advocates believe innovative fund marketeers have hijacked the fund business from the portfolio managers. The reason so many fund categories are required is that the marketing departments have created all manner of funds, many of little real value to retail investors. Whatever happened to basic bread and butter investing?"

Even the managers won't buy these funds
06/10/06   Funds
"Always be wary of a fund whose strategy sounds more like a marketing pitch. Get exposure to stocks without any of the downside. That's the pitch of principal-protection funds, and it sounds pretty compelling. If you just hold the funds for five years you'll get your principal back, as well as possibly some price appreciation to boot. Principal-protection funds buy stocks to give you market exposure, but they also guarantee your principal by buying bonds and possibly an insurance wrapper. At the risk of causing you to feel a little weltschmerz, I have to tell you the funds don't live up to their promise."

Curse of the cold hand strikes
05/30/06   Funds
"Nothing chills congenial feelings between a money manager and his investors faster than a cold streak. Years of admiration and satisfaction can fade in an amazingly short time when the manager's performance falters -- even if the reason is nothing more substantial than a temporary shift in market conditions."

Mild-mannered Francis Chou
04/02/06   Funds
"He has only a grade 12 education and used to labor as a Bell Canada repairman. He has never worked for a big bank or a mutual fund company. He largely shuns the Courvoisier-chugging Bay Street set. But if you're searching for the best mutual fund manager in Canada, you'll find it difficult to avoid quiet, shy Francis Chou."

RBC announces massive fund overhaul
03/31/06   Funds
"The RBC O'Shaughnessy U.S. Growth Fund will be capped effective June 30, 2006, to allow the fund's management to deploy the large amount of capital gathered recently. The move affects only new investment, and pre-authorized investment plans set up before the end of June will not be affected."

TERs tell you the exact cost of owning a fund
03/12/06   Funds
"I know, I know. MER means zzz to many of you readers. Consider this snooze factor noted as the brand new sibling of the management expense ratio, or MER, is introduced. It's called the trading expense ratio, or TER, and it finally gives us investors a way of telling exactly how much it costs to own our mutual funds."

Norshield receiver finds little money
11/19/05   Funds
"Retail investors in the failed Norshield Group of companies, which include Norshield Asset Management and Olympus United Funds, may only get back $8.5 million of the $132 million they placed in Norshield funds, according to the second report of receiver RSM Richter."

Volatility, thy name is bonds
11/06/05   Funds
"Bonds are supposed to protect against the sort of stock market treachery we saw this October, but you'd never know it from what actually transpired. As stocks fell, bonds gave them a run for their money."

How fund rankings can cause stocks to gyrate
10/09/05   Funds
"Mutual funds are a main cause of the boom-and-bust cycle that so often occurs among individual stocks and industry sectors, a new study has concluded."

Trailer fees: a vitamin or toxin?
10/09/05   Funds
"Most investors don't understand trailer commissions and the inherent conflicts-of-interest they cause. Many don't know they exist despite the many articles that have been written on the topic. Now that you know they exist, ask your adviser to disclose them and make sure you get your money's worth."

Saxon fund keeps it simple
09/30/05   Funds
"Howson believes his value-investment style has also contributed to his success. He emphasizes the adherence to his style - the fact that he applies it consistently - and points to his outright rejection of technology stocks for Saxon Balanced fund over the past five years as an example of that discipline leading to strong results over the long term."

Allegations aside, Norbourg a plain dumb investment
09/11/05   Funds
"And now for a short seminar on crummy mutual funds, courtesy of Norbourg Asset Management. You know Norbourg -- it's the Montreal money manager alleged to have embezzled $70-million in client money."

Labour funds reel as Ont. axes tax credit
09/04/05   Funds
"The Ontario government is axing its 15-per-cent tax credit for labour-sponsored funds, dealing a severe blow to the recovering sector. Fund executives were stunned by the move, predicting that this jeopardizes the future of the LSF business in Ontario, its largest market. It's the latest setback for the asset class in Canada. In June, Winnipeg's Crocus Investment Fund became the subject of a criminal probe by the RCMP."

Turnround hope can be bad for you wealth
08/30/05   Funds
"Mutual fund managers sometimes grumble that investors are too focused on short-term returns but hanging on to a poorly performing fund for too long is a far more common problem."

IFIC chairman Michel Fragasso steps down
08/25/05   Funds
"The chairman of the Investment Funds Institute of Canada stepped down Thursday after RCMP and other police officers swooped down on several offices in Montreal and Toronto as part of a major fraud investigation against his company, Norbourg Asset Management Inc. Michel Fragasso, a senior vice-president of Norbourg, resigned late Thursday as chairman of the national association for the mutual fund industry in the wake of the Norbourg police investigation."

Winning the active management game
08/13/05   Funds
"Swensen offers advice to help individual investors triumph over very daunting odds."

Leith Wheeler doesn't buy 'new era'
07/22/05   Funds
"The investment team doesn't buy the idea that oil has entered a "new era" in which oil prices stay at $60 (U.S.) a barrel or higher, and so applies a "very conservative" price of $34 a barrel three years from now when valuing oil and gas producers. "We believe that over time more supply will come on stream and demand will stabilize," Mr. Palfrey said."

Investors turn on hedge funds
07/18/05   Funds
"Hedge funds have struggled to make money this year, which means that for the first time in recent memory, it's getting tough for them to attract new money as well."

Hedge funds: a wild quarter
07/03/05   Funds
"The once-high flying funds are struggling to make money as market conditions have gotten tougher."

Great shareholder letters
06/29/05   Funds
"Mutual fund managers are required to publish quarterly reports, which are usually accompanied by a letter to shareholders, written by the portfolio managers. These letters are available to anyone who's interested on most funds' Web sites. Shareholder letters are often packed with rich content, including: commentary on the current state of the market; investing philosophies; recent stock picks; opinions on what the future may bring; and pretty much anything else the manager wants to talk about. Although a letter is typically written for the benefit of shareholders in a particular fund, it also serves as a great fix for stock junkies who hope to glean some keen insight from investment managers and perhaps pick up a good pick or two along the way."

Protect your funds from an oil spill
06/26/05   Funds
"Maybe you're prepared for your energy mutual fund to fall in value if oil prices snap back, but what about your Canadian equity fund, your dividend fund, your balanced fund, your income trust fund, your U.S. equity fund and your global equity fund? Each of these categories is home to fund managers who have loaded up on energy stocks. Combine their funds in just the right way and you might find that 25 per cent or more of your portfolio is living and dying by oil prices. For even moderately conservative investors, that's too much."

Fund firms plan to give investors a break
06/26/05   Funds
"A fee-cutting revolution has broken out in the mutual fund industry. CI Mutual Funds, the country's third-largest fund company, said yesterday that it will ask its clients to vote on a proposal that will cut fund ownership fees across the board, then lock them in as of the beginning of September."

PH&N to launch higher-fee funds for clients seeking advice
05/17/05   Funds
"Personal advice has its price, even at Phillips Hager & North Investment Management Ltd., the Vancouver-based no-load fund firm that is well known for having some of the lowest management expense ratios in the business."

Investors get break on costs of mutual funds
05/09/05   Funds
"Mutual fund costs borne by the investor are falling and more declines are expected, an industry study has found."

Mutual fund price war
05/08/05   Funds
"The question is whether CI's discount move is a publicity stunt or the opening shot in a fund war that could see the high-cost players capitulate."

The origins of mutual funds
04/17/05   Funds
"Mutual funds emerged as early as the second half of the 18th century in The Netherlands. The paper traces the history of mutual funds from the development of securitization in the 17th century to the invention of depository receipts in the 19th century. The apparent motivation for organizing the first mutual funds was to provide diversification for small investors."

Here's one good reason to fire yourself
04/10/05   Funds
"Better performance would be nice. Unitholders have had it rough. If you invested $10,000 in the fund in February, 2000, you'd have about $950 left. That's a loss of more than 90 per cent. How did that happen? "The idea is you go in and find stocks where there's earnings momentum and revenue momentum and you own them and you don't own resources because it's a growthy portfolio . . . and it just hasn't worked." So you've fired yourself?"

No need for foreign equities in Canadian funds
03/27/05   Funds
"Now that the foreign content limit has been eliminated, the rationale for putting foreign securities into domestic funds evaporates along with it."

Fund firms moving to kill clones
03/11/05   Funds
"With the federal budget passing a third and final parliamentary vote on Wednesday, major mutual funds companies are starting to act on Ottawa's decision to eliminate the foreign content rule."

The new money men
02/18/05   Funds
"A clever mutual-fund manager could, of course, pursue this approach in the new environment. But it has become much more sensible to start a hedge fund. Why? Because, to cite a phrase of the moment, a hedge fund is "a compensation scheme masquerading as an asset class". Whereas the average mutual fund charges 1% or 2% of assets, and smart buyers can pay a fraction of that, hedge funds charge 1% or 2% plus a big slug of profits, typically 20%, but often more. One well-known, but secretive, fund based on Long Island is reputed to charge 5% of assets plus 44% of profits. Another leading fund charges no maintenance fee but 50% of profits. An industry consultant says he has seen a new fund that will receive 80% of any excess above a guaranteed return linked to a well-known index. Even these huge costs do not really reflect what investors pay, since most hedge funds agree to conduct business through a prime broker, which extracts fees through stock- and bond-lending charges, as well as trading costs based on the fund's net asset value."

Forget the luxury hook; fund makes promises it can't keep
02/11/05   Funds
"Many people believe that if you rub up against money, some of it will rub off on you. Sometimes, they forget that the heat of the friction makes it easy to get burned."

O'Shaughnessy sticks to the numbers
01/20/05   Funds
"With so many mutual funds built and sold on the premise that knowing how the underlying companies are run is key, it's interesting to meet an investment manager who doesn't interview company executives at all. If past performance is any indication, the computer-driven, numbers-only approach works."

A fund for '05
01/20/05   Funds
"The Mawer organization is unfamiliar to most people, but it is one of the best boutique houses in Canada , with a number of top-quality funds. The Canadian Equity Fund, managed by Jim Hall, has an above-average performance record over all time frames, with a better-than-average risk rating." - A long-time Frugal Fund

Suits contend funds fail to collect
01/20/05   Funds
"In a 2002 law review article, Mr. Cox reported on a study he undertook with a colleague, finding that of institutional investors eligible to file claims for part of settlement proceeds, only about a third actually do so. He estimated that in the aggregate, institutional investors leave more than $1 billion unclaimed each year."

AGF introduces low-load option
01/12/05   Funds
"GF Funds has begun re-tooling its operations in an effort to reverse a lengthy spell of net redemptions. The first step, announced today, is a low-load purchase option on its mutual funds. The change means there will be no upfront sales charge and a shortened redemption fee schedule (three years) on the bulk of AGF's funds."

Assante latest fundco to cut fees
01/12/05   Funds
"As a result, 11 Artisan portfolios now have a new management expense ratio (MER) of 2.86% in the class A version and 1.79% MER in the class F version. Toronto-based Assante advisor John De Goey says the cuts are a step in the right direction, but are too little to really benefit consumers."

Mutual-fund giants pay price of betrayal
12/17/04   Funds
"The settlement spotlights an amoral attitude among certain players on the Street. It's an attitude that says if there's no law forbidding an activity, and that activity earns us a profit, then it must be fine to do it, right? Because the paper trail here is clear. Most money managers resolutely refused to allow the market-timers in the door, on the grounds that their activities would garner higher returns than long-term investors, which just wasn't fair. A few firms left the doors wide open, or took great pains to ensure that such trading could take place."

Bank-sold wrap accounts don't live up to sales pitch
12/05/04   Funds
"The sales pitch for bank-sold wraps is that they're an easier, more intelligent, more personalized approach for investment know-nothings than using individual funds. The reality is quite a bit more mundane, according to Prof. Milevsky. "Finance academics look at these things and they say, 'wrap account, what is this?' It's just another mutual fund.""

Who are the low-cost leaders?
11/28/04   Funds
"None of these companies, Fidelity included, poses any serious competition to no-load companies such as Phillips Hager & North, Saxon, McLean Budden, Beutel Goodman and Mawer. These firms have much cheaper MERs than the big guys, but they don't register with most investment advisers because they pay little or nothing in the way of commissions (that's why their fees are so low)."

Fund companies tinker with sales charges
11/22/04   Funds
"The problem is all those fund sales in the nineties are now coming off the DSC schedule. Fund companies keep the details under lock and key but it is safe to say that every month, there's less incentive for billions of investment dollars to stay put. It's created a mess of competing interests."

Too patient with your funds?
11/21/04   Funds
"You have a money-losing mutual fund on your hands, but you're sticking with it. Are you a sensibly patient investor or a patsy?"

OSC can still turn investigation into victory
09/23/04   Funds
"The next stages of fund industry reform should stick to fees as well, specifically additional disclosure of how much investors are paying. Fund companies still don't spell out the sometimes significant amounts they pay in trading fees, even though almost every other fee is accounted for. As well, investors need to be shown in dollar terms exactly how much they've paid in fees each year."

OSC strike against fund industry
09/23/04   Funds
"There have always been people who believed they were smarter than everyone else, could jump in and out of the market, exploit loopholes, make the fast buck. There always will be. That some of these people reside on Bay Street instead of Wall Street, and that Canadian mutual fund companies took their money, is neither a shock nor a grave scandal."

Bond fund risks outweigh rewards
09/07/04   Funds
"Bond funds are generally poor investments, with fees that are far too high, wiping out much of their returns and making them not worth the risk for the average investor, according to one prominent mutual fund analyst."

Vanguard shuts out int'l small-cap investors
09/03/04   Funds
"By closing its International Explorer fund to new investors, Vanguard has thrown another significant roadblock in the path of investors who want their money to work as hard as possible for them."

How many funds are too many?
08/29/04   Funds
" The reality is that I'm not sure it is about how many funds you have but rather the types of funds that you own. Far too often, I see 5 to 7 funds in a portfolio that do the exact same thing. When one moves up, so do the other six. And when one moves down, so do the other six. In fact, someone has coined the term DIWORSIFICATION."

Battling fund myths
08/22/04   Funds
"A recent release by Mackenzie Financial Corporation has sparked all kinds of public and private debate. It rebutted the media's persistent pro-indexing message with performance comparisons aimed to showcase active managers' superiority - which was reported in a recent National Post column. Rebuttals proliferated and it became clear that not only is Mackenzie's comparison flawed, but that even rebuttals had holes."

Fund mergers bring tax headaches for unitholders
08/08/04   Funds
"The net result of mergers is that losses are being lost to the fund. They are more than the capital gains"

Mutual fund taxation
08/08/04   Funds
"If investors really understood the bizarre tax issues surrounding actively managed mutual funds they might think twice about investing."

Let's get fund brokerage fees out in the open
07/22/04   Funds
"MERs are a great indicator of fund costs, except for one problem. They don't include the commissions the fund pays every time its manager decides to buy or sell some shares."

From alpha to omega
07/16/04   Funds
"Such strategies might make money when there are few players and lots of inefficiencies, but they are much less lucrative when there are many funds doing the same thing. Now that there are, for example, some 600 hedge funds specialising in credit (loans and corporate bonds), the inefficiencies on which they feed are much reduced, leaving the managers scratching around for other strategies or taking more risk. Generally, this means leveraging returns by borrowing more."

Can we trust the mutual fund industry yet?
07/14/04   Funds
"Despite the ongoing investigations, Spitzer and top regulators at the SEC have said in recent interviews that the worst of the fund industry scandals probably are now past."

Bond mutual funds -- here's the best of a bad lot
07/09/04   Funds
"If you're buying bond funds today, a low MER is an absolute must. The manager of your bond fund is in a tough enough battle to make you money without bearing the weight of an overstuffed MER."

When funds have to show their hand
07/04/04   Funds
"While fund companies' actual votes are not yet public, their voting guidelines are. And an analysis of the issues that fund companies care about - or do not - is revealing."

The search for low-fee investments
06/27/04   Funds
"And it happens in the fund world that low fees and good returns often go hand in hand. Some prime examples: Phillips Hager & North, McLean Budden, Beutel Goodman, Saxon Funds, Chou, Mawer, and Leith Wheeler."

Seg funds
06/25/04   Funds
"The cost of owning segregated funds has escalated so quickly since the late 1990s that they have become a luxury many investors can't afford."

PHN's entrepreneurial spirit keeps its costs low
06/23/04   Funds
"It's one of Canada's best-run mutual fund companies -- and one of the most difficult in which to invest."

It's not how it performs, it's about commission
06/23/04   Funds
"When it comes to fees, it's always been thus. Even when its funds boasted red-hot performance, Altamira Investment Services Inc. couldn't catch on with the broker crowd. But when the company struck a deal with Triax Capital Holdings Ltd. that saw advisers earn a 6-per-cent selling fee on a small-cap Altamira-managed fund, it suddenly had a $200-million hit on its hand."

How we probed the churn patterns
06/21/04   Funds
"The aggregate annual profits for the market timers were calculated by attributing all churn in excess of the benchmark standard to rapid in-and-out trading. And finally, we calculated the impact on the funds' assets by applying Mr. Zitzewitz's estimate of 60 to 70 basis points in profit pocketed by the market timers for every round trip."

Select few reap unfair gain
06/21/04   Funds
"Eric Zitzewitz, an assistant professor of economics at Stanford University's business school, whose research has been cited in court documents, estimates that the dilution created by market timers costs average shareholders in international mutual funds 1 to 2 per cent of their assets each year."

Understanding downside risk
06/13/04   Funds
"By seeing how they perform during the worst times, we have a better understanding of how these investments will react to future periods of stress. By predicting the worst, the investor gains insight."

Dig deeper
05/20/04   Funds
"Canadians like to take the moral high ground when it comes to comparisons with the U.S. We wisely stayed out of the invasion of Iraq, and we like to rein in the free market when it comes to health care. That same sense of superiority, however, could be blinding us when it comes to the Canadian mutual fund industry."

Maverick managers hit on brainwave
05/14/04   Funds
"They're making peanuts, working in a small room in the basement of one of the partners' homes. But they have a point to prove. The mutual fund business is failing, they say, because it places too much emphasis on collecting assets and charging high fees and creating new, flavour-of-the-month funds, and too little on making money for their customers -- mostly middle-class investors who have few other options because they're not rich enough to qualify for higher-end, lower-cost investment counselling services."

U.S. watchdog calls for end to trailer fees
05/13/04   Funds
"Ralph Lambiase, president of the Washington, D.C.-based North American Securities Administrators Association, calls for the changes in comment letters to the U.S. Securities and Exchanges Commission. Lambiase wants the SEC to eliminate mutual fund 12b-1 fees, which are similar to trailer fees in Canada. He also suggests that requiring mutual funds to impose a minimum holding period for fund shares would more effectively curtail market-timing abuses than the imposition of a mandatory 2% redemption fee."

Why I like Saxon
05/12/04   Funds
"There are several good boutique fund comnpanies in Canada. One of my favorites is Saxon which offers some of the best performers in the industry plus the important advantage of a low cost structure and no load charges."

They're called trailing commissions
05/11/04   Funds
"In the more than 10 years I've been a financial advisor, the very vast majority of financial advisors have referred to those ongoing payments made from mutual fund companies to advisors as "trailer fees". The media has gotten in on the act, and they too use this terminology. The trouble is, if you look at any prospectus for any fund where ongoing advisor payment is involved, you will see that these are legally referred to as "trailing commissions". Simply calling them fees doesn't make them fees."

Are DSCs finally on their way out?
05/09/04   Funds
"Clients are beginning to appreciate fully the wiggle room they have in picking products, negotiating fees and choosing their contracts. Advisors, in turn, will probably need to focus more on support, and be willing to negotiate fees."

The sleaziest show on Earth
05/08/04   Funds
"Most investors should steer clear of hedge funds. Lush pay has lured the best and brightest to hedge funds, says Michael Price, a hugely successful money manager. But "unless you've got at least $5 million to invest, hedge funds are not worth the risk and fees. Mutual funds will get you where you want to go, so screw hedge funds." With more polite language, Warren Buffett said the same thing at the Berkshire Hathaway meeting recently. A word from the wise."

Earn a solid return in the slow lane
05/08/04   Funds
"By putting your clients in a dividend fund you'll not only help them beat the market but also minimize their exposure to risk in their portfolios"

Small names are big winners
04/24/04   Funds
"Quiet professionalism speaks loudly in this year's ranking of the best mutual fund families. McLean Budden is No. 1, followed by Phillips Hager & North Investment Management in second place and Mawer Investment Management in a fourth-place tie. Each is a no-load fund family run by a company that gives unitholders the benefit of its expertise in managing money for pension funds, foundations, not-for-profit organizations and high-net-worth types. Haven't heard of them? That's because these companies let money come to them rather than going after it with big marketing budgets and by paying big commissions to financial advisers who sell their products."

True value stocks different from those in value funds
04/18/04   Funds
"The reason value mutual fund managers have not outperformed growth mutual fund managers is that the terms "value" and "growth" as used by almost all mutual funds these days is nothing but marketing spin. Sure, there will be periods when the growth funds outperform the value funds and vice-versa, but over time the returns of the two groups even out. The fact remains that value mutual funds do not own "true" value stocks."

Funds' dirty little secrets
04/17/04   Funds
"The more time I spend in the money management industry, the more I learn about the nearly infinite number of ways that investment firms can take advantage of their investors. All sorts of abuses result from the combination of motive -- there's big money at stake -- and opportunity. Even sophisticated investors (of which there are few) aren't aware of or can't detect certain activities."

McLean Budden chops MERS again
04/06/04   Funds
"McLean Budden Ltd. said it is cutting its management fees on all of its mutual funds, making them among the lowest in the industry."

Hard line on 'soft dollars'
04/06/04   Funds
"Critics of the system and they are growing by the day point to the obvious potential for abuse. When the SEC did a study of soft dollars in 1998, it found that some of these credits were used to buy theatre tickets, limousine rides and even interior design services."

The disgrace of soft dollars
03/23/04   Funds
"Investment funds are secretly lining their pockets by inappropriately charging billions of dollars' worth of expenses to investors. These "soft-dollar" arrangements allow managers to overpay in brokerage commissions in exchange for research, office space, magazine subscriptions, etc. -- with shareholders unwittingly footing the bill."

7 funds with high fees, low returns
03/20/04   Funds
"The mutual fund industry's piggies are eating your bacon."

Putting water in your wine
03/19/04   Funds
"Imagine if the funds used to construct these portfolios were in fact, impure. In short, imagine if advisors were figuratively putting a little water in their wine by using (for instance) a Canadian Equity fund that had 20% of its holdings in U.S. equities. It would come as no surprise to most readers that most Canadian equity funds have significant non-Canadian holdings."

Canadian fund fees not that much higher than U.S.
03/09/04   Funds
"Mr. Spitzer may have something to say about what happens with fund fees in his country, but here in Canada it's up to individual investors to look after themselves. That's fine because there are all kinds of low-cost fund options out there, including index funds, no-load fund families and some mainstream funds that happen to be reasonably priced. Want to know the best way to bash the fund industry over the fees it charges? Just ignore overpriced junk funds."

Value funds outperform growth
03/08/04   Funds
"Yet academic research has shown consistently that value investing produces better returns over time -- up to 7 percent a year on average, said Lubos Pastor, a finance professor at the University of Chicago Graduate School of Business."

True costs of mutual funds difficult to determine
03/04/04   Funds
"Millions of Americans who invest in mutual funds have only a vague notion, if that much, of how much it costs them in fees and expenses."

Canadians mutual fund sales soar
03/03/04   Funds
"Canadians showed renewed confidence in equity markets and flocked back into mutual funds in a big way in February as they spent $5-billion during the RRSP season's last month."

A wake-up call to the fund industry
02/21/04   Funds
"The CSA, as well, has hurt mutual fund investors and its own credibility by giving in to the industry and leading the way in eliminating long-recognized, much-needed protections for fund investors."

RRSP ads once again promoting track record
02/11/04   Funds
"The annual RRSP ad blitz has begun -- and it's bound to give investors a jolt of deja vu.With stock markets rebounding in 2003 after three torturous years, mutual fund marketers are once again trumpeting snappy performance numbers in registered retirement savings plan campaigns, a tactic most haven't used in years."

IFIC should aim its guns at other fund industry issues
02/04/04   Funds
"IFIC was certainly within its right to complain about the CDIC commercials, but is this really the issue that tops the group's agenda right now? Mutual fund investors hope not."

Mutual-fund industry wants federal ads axed
02/03/04   Funds
"Canada's mutual-fund industry is locking horns with the federal government, charging that an advertising campaign by one of the government's agencies is scaring away investors at the height of the RRSP season -- just when fund sales are recovering after a nasty slump."

Don't get hit by falling rates
01/22/04   Funds
"Rate cuts give bond fund holders a short term bounce but "bond funds will continue to eke out modest returns" in the optimistic case of long term stable rates, Rothery says. So he favours low-fee "frugal funds" from firms like PH&N, Leith Wheeler, Legg Mason and Barclays. "Should bonds yield 5%, you don't want to see almost half of your interest going to pay fund fees.""

Will scandals spoil the fun?
01/18/04   Funds
"At long last, the bull market is back. And not a moment too soon for long-term fund investors, who after three years of wrenching losses are finally being rewarded for their patience."

Management expense ratio update
01/11/04   Funds
"There have been many articles in the press lately about Management Expense Ratios (MERs), and some people may be wondering what exactly is included in the calculation of the MER of a mutual fund. The following is a review of the exact makeup of MERs."

Investing: Profession or Business?
01/10/04   Funds
"Based on our S&P scouting report, these managers seem to follow the index's strategy with regard to turnover and limited time on macro forecasting, and deviate from the index's strategy with regard to concentration and a sharp focus on price-to-value discrepancies."

Watchdog to abolish mutual fund conflict rules
01/10/04   Funds
"Ms. Stromberg said the rules governing conflicts and self dealing were initially put in place to ensure that fund managers meet their fiduciary duty by acting in the best interests of investors. She said requiring funds to have independent committees is "not an equal trade-off." The proposed rules will provide less protection for investors than the existing regime, where rules are in place prohibiting mutual funds from such practices as owning stocks or bonds in a related entity, she said. There is also plenty of evidence in the corporate arena that independent directors are often powerless to prevent problems, she added."

Investors beware the backside of the bull
01/07/04   Funds
"It's time you were warned about the other kind of bull market. That's the one where the bull's in the propaganda generated by an investment industry looking to cash in on a huge stock rally. Right now, we have both kinds of bull markets."

More than pure luck
01/05/04   Funds
"For the 13th year in a row, a mutual fund called Legg Mason Value Trust (LMVTX) has beaten the benchmark Standard & Poor's 500-stock index. No other fund has come close to this amazing feat. In fact, most funds, most of the time, fail to return more than the S&P, which is a good proxy for the market as a whole.For the 13th year in a row, a mutual fund called Legg Mason Value Trust (LMVTX) has beaten the benchmark Standard & Poor's 500-stock index. No other fund has come close to this amazing feat. In fact, most funds, most of the time, fail to return more than the S&P, which is a good proxy for the market as a whole."

Mutual fund portfolio contagion
12/31/03   Funds
"hey are both consistent with the idea that information about stocks diffuses gradually across the investing population, and that this "epidemic effect" leads to momentum effects in stock ownership and trading."

Playing in a closed game
12/24/03   Funds
"Unscrupulous mutual funds, as investors have learned to their chagrin, have found plenty of ways to cheat. There are, however, sound alternatives with many of the benefits of mutual funds but without the drawbacks. I discussed one such investment -- exchange-traded funds (ETFs) -- a few weeks ago. Now, consider closed-end funds"

Manulife, John Hancock in fund probe
12/24/03   Funds
"Manulife Financial Corp. and John Hancock Financial Services have been served with subpoenas for information about trading practices as part of ongoing probes into the mutual-fund industry."

Out of sight, out of mind
12/21/03   Funds
"We argue that the purchase decisions of mutual fund investors are influenced by salient, attention-grabbing information. Investors are more sensitive to salient in-your-face fees, like loads and commissions, than operating expenses; they are likely to buy funds that attract their attention through exceptional performance, marketing, or advertising. Our empirical analysis of mutual fund flows over the last 30 years yields strong support for our contention. We find consistently negative relations between fund flows and load fees. We also document a negative relation between fund flows and commissions charged by brokerage firms. In contrast, we find no relation (or a perverse positive relation) between operating expenses and fund flows. Additional analyses indicate that mutual fund marketing and advertising, the costs of which are often embedded in a fund's operating expenses, account for this surprising result."

The second largest tax investors pay
12/11/03   Funds
"Well, let's face it -- nothing is worse than inflation. The Voluntary Graduated Financial Services Tax, however, can be a lot worse than the highest income tax rate. By my calculation, accepting an annual expense ratio of 1.39 percent on an equity mutual fund is the equivalent of accepting a 40 percent tax rate from the financial services industry. The amount you accumulate in 40 years will be only 60 percent of what you could accumulate if there were no financial service expense."

SEC action on high-yield funds near
12/11/03   Funds
"U.S. regulators are expected to bring an enforcement action as soon as today in their probe of mispricing of shares in high-yield bond mutual funds, people familiar with the matter said Thursday."

Mutual funds or hole in the ground?
12/11/03   Funds
"How times change. Today, mutual funds are the biggest financial scandal since Martha Stewart phoned her broker. What Martha did was entertaining, but not serious. This is serious. The only reason this scandal hasn't generated more popular outrage is that nobody can understand it."

SEC to act against MFS
12/08/03   Funds
"Sun Life Financial Inc. said Monday its U.S. mutual funds unit may face enforcement action by the Securities and Exchange Commission."

CIBC unit may face class action
12/01/03   Funds
"The asset management arm of Canadian Imperial Bank of Commerce is the target of a proposed class action after it allegedly failed to disclose a change to a mutual fund that left investors exposed to the falling U.S. dollar."

Putnam: The greed machine
11/25/03   Funds
"If you're like most investors, you probably think that the insider trading scandal at Putnam Investments, the nation's fifth-largest fund company, is a sordid but simple tale of portfolio managers picking investors' pockets."

Mutual fund abuses found in Canada
11/24/03   Funds
"A U.S. economist who tracked mutual fund abuses in the United States says there is evidence of similar trading problems occurring in Canada."

The real costs of turnover
11/23/03   Funds
"Not surprisingly, the most active group trailed the least active group by an average of 5.5% per year. And this doesn't even consider the effect of taxes, which were surely significant. For individual investors and mutual funds alike, the message is clear -- low turnover equals better performance."

Fund scandals for dummies
11/18/03   Funds
"There's some reason for confidence. Late trading is less likely in Canada because of FundServ, an intermediary that has been executing fund purchases or sales since 1993. If you buy fund units after markets close at 4 p.m., they are priced at the 4 p.m. close the following day, says FundServ CEO Alan Hutton. That stops investors from profiting from "stale" prices: buying after the market has closed, as has occurred in the U.S."

Bigger fund ripoffs exist than illegal trading
11/16/03   Funds
"It's fascinating to watch the regulators tie themselves in knots to investigate the fund sector. As usual, they're getting only part of the picture. Illegal late trading is a scandal, sure -- but so are many of the things fund companies do every day that are perfectly legal."

A closer look at investment fees
11/16/03   Funds
"Only time will tell whether or not index products out-perform actively managed products. They areuseful tools for certain types of investors who seek alternatives to active management. Yet, it is not unreasonable to conclude that above-average, low-fee, actively managed products stand a strong chance of providing superior returns."

Some mutual fund firms just don't get it
11/13/03   Funds
"The thing about scandals is they usually blow over. So the Canadian mutual fund companies that have been hiding from the U.S. mutual fund industry scandal will probably make out fine. Odds are pretty good that the sort of trading abuses that several U.S. fund companies have allowed will turn out to be rare or non-existent in Canada. Any risk of an investor backlash will melt away. Or not."

Investor Behavior = Returns
11/04/03   Funds
"What has the largest impact on the returns individual investors get? Is it the actual investments they own, or their own behavior?"

Perigee changes name to Legg Mason Canada Inc.
10/31/03   Funds
"Perigee Investment Counsel Inc. is changing its name to Legg Mason Canada Inc. to reflect the money manager's purchase three years ago by Baltimore-based Legg Mason Inc."

Sceptre rushes to reassure jittery clients over Putnam
10/31/03   Funds
"Sceptre Investment Counsel Ltd. is scrambling to reassure jittery clients after news that two of four portfolio managers fired by U.S.-based Putnam Investments for allegedly profiting from improper trading helped to run two pooled funds for institutional clients in Canada."

SEC cracks down on Putnam for self-dealing
10/29/03   Funds
"The U.S. Securities and Exchange Commission has announced civil actions against Putnam Investment Management LLC and two former Putnam managing directors and portfolio managers, Justin Scott and Omid Kamshad, in connection with their personal trading in Putnam mutual funds."

Gold gives boost to small-cap sector
10/28/03   Funds
"Of the outperformance of junior mining companies and other more speculative stocks, Ferguson says: "Investors in the small-cap area have been focusing on companies that do well in environments of strong economic growth. They seem to be, he says, downplaying the possibility of other scenarios such as slower economic growth, he says."

Still waiting for lower fund fees
10/28/03   Funds
"Investors losing patience as cuts fail to materialize. Canada's sky-high mutual fund fees are again under the microscope. As reported in yesterday's Financial Post, management expense ratios (MERs) have soared the last three years."

Shadow on the funds
10/27/03   Funds
"Widening probes into the practices of U.S. mutual funds are uncovering a surprisingly large number of abuses, conflicts of interest and other irregularities, many of which have benefited wealthy clients at the expense of small ones."

Mutual funds weather scandals
10/26/03   Funds
"We at the Fool have also reported on these developing scandals. In fact, we've been warning investors for many years about various problems inherent in mutual fund investing. We've railed against such problems as their outlandish fees, overdiversification, below-average performance, and counter-productive, short-term thinking."

Mutual recriminations
10/20/03   Funds
"A former fund manager has admitted to obstructing an investigation into improper mutual-fund trading, making him the first executive to face a criminal charge in the rapidly widening probe into the industry's practices"

SEC unveils plans to combat late trading of funds
10/12/03   Funds
"The regulator is considering new rules and rule amendments designed to prevent late trading abuses. It is examining the feasibility of requiring that the fund (rather than an intermediary such as a broker-dealer or other unregulated third party) must receive the order prior to the time the fund prices its shares for an investor to receive that day's price."

Is your fund firm earning its keep?
10/05/03   Funds
"Wanted: Frugal, industrious mutual funds for long-term relationship. No fee-hogs need apply."

Funds grapple with growing scandal
10/04/03   Funds
"The list of big-name companies engulfed in a scandal involving mutual fund trading abuses lengthened Friday, leaving a burning question for the $7 trillion fund industry: How much worse will it get?"

Investors should see where cash goes
10/02/03   Funds
"One mutual fund industry executive's take on the idea of showing investors exactly how much they're paying in fund fees: Good idea in theory, but not for us."

Mutual fund tax efficiency
10/01/03   Funds
"Is there a list that shows the tax efficiency of individual mutual funds? If so, how do I get it?"

It's time for mutual funds to stop burying fees in muddy MERs
09/25/03   Funds
"I'd like to know how much my mutual funds are costing me in fees. Sure, I've got the management expense ratio (MER) to give me an idea of how much I'm paying, but that's not good enough. I want a dollars-and-cents breakdown."

The great fund ripoff
09/22/03   Funds
"Like Joshua shattering the walls of Jericho, in early September New York State Attorney General Eliot Spitzer shook the mutual fund industry to its very foundations."

Fund scandal may run deeper
09/22/03   Funds
"Mutual fund companies repeatedly allowed Wilshire Associates, the investment consulting firm, to engage in a rapid-fire trading strategy that netted the firm huge returns -- and came at a cost to the mutual funds' long-term investors, according to a report in the October issue of Money Magazine."

Parts and labour sold separately
09/19/03   Funds
"With unbundled investment products, advisors could set a certain (perhaps sliding scale) fee schedule and then ask clients what "building blocks" they would like to use in constructing their portfolios. Products like exchange traded funds and true no load funds (PH&N, Mawer, Perigee, etc.) are often as good as or better than conventional products like A Class or "embedded compensation" mutual funds, yet substantially cheaper."

Domestic stock funds in red again
09/19/03   Funds
"Canadians pulled nearly $200-million from domestic stock funds in August, the Investment Fund Institute of Canada reported yesterday, extending their losing streak to 15 months and suggesting that investors are not yet convinced that a six-month rally in equity markets has staying power."

Illegal trading appears rampant
09/14/03   Funds
"The alleged illegal trading that prosecutors are investigating at a few mutual fund firms might be more widespread and costly to investors than thought. Illegal trading occurs in at least one out of every six mutual fund families and costs investors about $400 million a year, according to an academic study released Thursday."

Morningstar rips suspect funds
09/14/03   Funds
"Fund-rating firm Morningstar issued an unusually critical report Friday recommending that investors consider selling their stakes in the mutual funds run by Janus, Strong, Bank of America, and Banc One."

Wait! Think before selling
09/12/03   Funds
"Some quality names have turned up on a list of funds that investors are fleeing in large numbers. Templeton Growth, Fidelity International Portfolio, AIC Diversified Canada_ these funds are all among those with the worst net sales at mid-year. In simple terms, investors were selling these funds at a much faster rate than they were buying in. The question here is why? Why, with the markets finally showing some life, are investors selling out of funds that are proven long-term winners?"

Second solid month for fund industry
09/11/03   Funds
""Slowing net redemptions for some firms (Mackenzie, CI) and a return to net sales for others (Franklin Templeton) may be indicative of a slowdown in equity fund net redemptions, or rather a pickup in gross purchases," said Dan Hallett, president of Windsor-basded Dan Hallett & Associates. "This doesn't exactly scream investor optimism, but it looks like a gradual improvement.""

Mutual funds under investigation
09/03/03   Funds
"Specifically, Canary was accused of "late-day trading," the term for buying mutual fund shares at their closing price after the close of trading in U.S. stock markets at 4:00 p.m. ET, allowing the firm to profit from corporate news released after the closing bell. The law requires mutual-fund trades made after the close to be processed at the next day's share value, to keep late traders from having an advantage over others."

Retail investors swim against the market tide
09/02/03   Funds
"The contrarian theory of investing is based on the premise that certain investors (usually small retail investors) generally do the wrong thing at important turning points in markets. Case in point: the year 2003."

The world's most honest money manager tells all
08/29/03   Funds
"Of course, mutual fund managers aren't a dishonest lot in general -- most seem like fairly straightforward, conscientious people. But you won't find many skippers who readily concede that the industry is riddled with problems that make index funds look most appealing."

For the love of the fund salesman
08/26/03   Funds
"Loaded word is independent. In the business of providing financial advice, the word is as important as "fresh" is to a butcher. There is a pretty limited market for old meat, and there is no demand for biased financial advice."

MER heretic fires opening salvo
08/09/03   Funds
"DeGoey sounds like an indexing heretic practising in the high-fee Vatican of Winnipeg, but the analogy is not that offbase. His subsequent essay, "MERs as Indulgences," evokes Martin Luther to call for a mutual fund reformation in Canada."

Slim and trim beats the bear
07/17/03   Funds
"It sure helps a mutual fund to be slim and trim when fighting the bear. That's slim as in having a low management expense ratio, or MER. A strong majority of the top-performing funds in the bear market of the past three years share this attribute."

Cost matters
07/10/03   Funds
"Financial products are perverse creatures. Virtually every other product in the world features higher costs for higher quality. BMWs cost more than Chevrolets for a reason- they're better cars. Investments are generally just the opposite: the more they cost, the worse they are. This is where the economics professor in me feels the need to disclaim the previous statement with the Latin axiom ceteris paribus- all else being equal. Of course, all else is not equal, and some managers do very well in spite of high fees, while others do rather poorly in spite of low fees, but as a general rule, the axiom holds."

High MERs can be justified
07/10/03   Funds
"If you're not demanding a whole suite of services and you have a decent amount of a portfolio you should be able to negotiate a fee quite a bit lower, whereas, if you're really asking for comprehensive planning and regular follow-up meetings, the price is going to be higher, and frankly, whether somebody is paying a lot, or not on their portfolio truly can only be assessed on a case-by-case basis, based on those factors."

Mutual fund scandal? Enough of the blame-game
07/10/03   Funds
"Mutual fund managers are, in aggregate, a reasonably large slice of the overall stock market. Depending on whose measure you use and which market you are talking about, mutual funds amount to 50% or more of the money in the market. That being the case, by definition the industry must offer the market's performance, less the industry's average management fees -- and that is exactly what we see. While you or I might think that 3.5% average management fees are inordinately high, consumers are freely choosing funds with such high fees; no one is hiding such fees from them." But it's still best to switch to low fee funds!

There are escapes from deferred sales charges
07/06/03   Funds
"You may blissfully own a DSC fund and never once think of having to get out. But what if your investing needs change, or what if the fund's brilliant manager finds a better gig somewhere else, or what if the fund's performance turns consistently rancid?"

The blame game
07/04/03   Funds
"A little-noticed guilty party in the stockmarket's boom and bust"

S&P study shows cheaper funds outperform
06/14/03   Funds
"S&P reported that, on average, funds with lower expense ratios have outperformed their more expensive peers in eight out of the nine domestic fund style categories over a one, three, five, and ten-year annualized basis."

Mutual fund study 'misleading'
06/12/03   Funds
"A recent study that suggests management fees on Canadian mutual funds have risen sharply over the past eight years is "highly misleading," the Investment Funds Institute of Canada said yesterday."

Fund industry isn't reasonable when it comes to fees
06/12/03   Funds
"One thing you have to admire about the mutual fund industry is the way it flouts the natural laws of economics and business."

What Canadians pay for fund management
06/12/03   Funds
"See what the data show in the Morningstar Survey of Canadian Fund Industry Management Expenses."

Fees top $10-billion last year
06/12/03   Funds
"Fund investors paid more than $10-billion in management fees last year, more than 3.5 times the amount paid in 1995, according to a report from Morningstar Research Inc."

Asset base decline erases good old days in fundland
06/10/03   Funds
"This is how far the mighty in the mutual fund industry have fallen: Right now, the largest fund in the country is a plain old money market fund."

Shun deferred sales charge funds
06/01/03   Funds
"How to describe deferred sales charge mutual funds... Dumb? Stupid? Crazy? DSC funds are all of these and more."

Exchange-traded funds are suddenly looking good again
05/23/03   Funds
"Before we get into a more detailed look at how ETFs and fund returns compare, it's worth a quick look at what ETFs have going for them. First, they simply strive to match the same returns as a target stock index, whereas equity funds employ a fund manager to actively pick stocks. Some fund managers can beat their benchmark stock indexes over a long period, but many can't. A major reason for this is that fund expenses reduce the net return to investors. Whereas the average large-cap Canadian equity fund management expense ratio is 2.51 per cent, the i60 charges just 0.17 per cent."

Cundill fund successful with unloved firms
05/22/03   Funds
"James Morton, value investor and lead manager of the Mackenzie Cundill Recovery Fund, which has sailed comfortably through the bear market, says he's happy to be known as a "bottom-fishing contrarian." The term bottom fisher fits because he buys companies when their stock prices are "bombed out." Contrarian is also apt because his choices tend to be unloved market orphans."

How to avoid fees
05/21/03   Funds
"I think Canada's largest fund company by assets has done something useful by raising fees at this time of dismally bad returns. Buying funds with a deferred sales charge is a bad move, and the Investor Group fee grab underscores this point nicely."

After-tax returns are what matter to fund investors
05/20/03   Funds
"The study examined more than 340 Canadian-managed equity and balanced mutual funds that had a track record over the period 1991 to 2001. The average rate of return on those funds over that time was 9.01 per cent compounded annually, before taxes. But you've got to realize that many of those funds made taxable distributions over that 10-year period. In fact, the average fund lost a full 1.35 per cent, compounded annually, to income tax on distributions alone (assuming the highest tax bracket), with the result that the true rate of return, after taxes, was just 7.66 per cent when investing outside of a registered plan."

A taxing truth
05/18/03   Funds
"Reading the latest report from Lipper on the effect of taxes on mutual fund returns is not unlike studying those tables that list the amount of heat produced by various kinds of chili peppers: We knew those suckers hurt, and now we know just how much. Over the 10 years through 2002, the typical equity fund returned an annual average of 6.8%, after accounting for sales charges and management fees. Factoring in taxes owed on that fund's yearly distributions, however, plus capital-gains taxes owed when fund shares are sold, knocks that return to just over 5% a year for investors in the highest tax bracket. (Fixed-income funds show similar results.) Bottom line: We've given the government about 25% of our gains, which weren't great to begin with."

Funds score dramatic turnaround in April
05/14/03   Funds
"Battered mutual fund investors received good news in the wake of April markets. Nine out of every 10 funds and 26 of 32 Morningstar Canada Fund Indices gained ground for the month. This is a big change from the first quarter, when 91% of funds and 26 of the indices were in the red."

Redemption fees will soar at Investors Group
04/15/03   Funds
"Redemption fees are going up-way up-for Investors Group clients. Effective May 5, Canada's largest sponsor of mutual funds is extending its redemption-fee schedule to seven years for its deferred-sales-charge funds, and doubling to tripling the fees for most periods of six years or less."

Glamour gone for fund managers
04/15/03   Funds
"So how do fund managers play the game? Most will claim they use a bottom-up approach, that is, they hunt out and buy value. Between the destroyed and overvalued names, though, that's a daunting exercise. So they turn into closet top-down managers, where they buy the best names in the sector and gamble that exterior forces, such as falling interest rates or rising commodity prices, will take them to the promised land."

AIC calls for after-tax disclosure
04/10/03   Funds
"Mutual fund companies are good at letting investors know how their performance stacks up before taxes are taken out, but AIC Ltd. is calling for its rivals to post their after-tax returns as well."

Diversification's fine, but only up to a point
04/09/03   Funds
"Besides diversification, mutual fund investors also know that the median equity manager doesn't beat the index after all the fees. That's usually held up as a good reason not to buy a mutual fund; it should be held up as a good reason not to buy a fund run by an average manager."

03/28/03   Funds
"Regulators fret that hedge funds' superior performance is not all it appears, and that investors do not fully understand all the risks. For a start, the raw performance numbers may flatter hedge funds. Those funds that have collapsed are not included in the averages. Moreover, because hedge funds are so lightly regulated and often highly leveraged, their apparently superior returns are due, at least in part, to their taking on much more risk."

Fund disclosure proposals flawed
03/28/03   Funds
"The resulting information that ends up in these documents is so watered down that anybody that looks at it and says well, why am I reading this? It isn't really telling me anything."

Fee'd me
03/28/03   Funds
"Most Canadian mutual fund fees are fat. The ones for managing cash are positively gluttonous."

Too much info
03/28/03   Funds
"History suggests there are two ways to keep the masses in the dark: One is to deprive them of information; the other is to drown them in it. The mutual fund industry has adopted the latter technique, perhaps to distract us from the bloodbath."

Your mutual fund is telling you to stay put
03/25/03   Funds
"What's laughable is suggesting people take it for granted that their advisers spent much time researching their investments, and that advisers continue to monitor these investments. Some advisers do this, others just sell mutual funds in the same way that others sell aluminum siding or cars. That is, hype the product, close the sale and move on."

Fund firms in survival mode
03/20/03   Funds
"With mutual funds having a rough ride, fund firms are looking for ways to keep clients invested." Humm, how about low fees?

Pension funds hedging on hedge funds
03/20/03   Funds
"Who is investing in hedge funds anyway?"

Fund critics applaud Buffett's comments
03/11/03   Funds
"A number of critics of the U.S. mutual fund industry said on Monday they agree with billionaire investor Warren Buffett's assessment that "zombie-like" fund directors have fallen down on the job."

Too many funds, says IFIC President
03/06/03   Funds
"Well, I guess the president of IFIC shouldn't say that, but I do think there probably are too many funds and I think some of the specialized funds are so specialized that they're almost like a stock pick, which is really quite contrary to the whole message of why you're in a mutual fund in the first place. You want diversification and some funds can be so narrow, they're not. In a proper asset allocation plan they're okay. But that is a concern. I think there are too many funds and compared to the United States per capita, we have about four times more than the Americans do per capita"

Striking the right balance
03/02/03   Funds
"Balanced funds combine both equity and fixed-income securities in one convenient package, but what is a fair price for this convenience? Cost-conscious investors should keep this question in mind when considering an investment in a balanced fund. This month I take a look at balanced funds from the frugal perspective and I focus on the Leith Wheeler Balanced fund in particular."

Mutual fund fees may rise
02/25/03   Funds
"The three-year bear market is taking its toll on mutual fund company earnings, which could spell higher fees and minimum investments."

Lessons to be learned from shuttered funds
02/24/03   Funds
"So when the market heats up again - and it will - remember this: It pays to be at least as anxious about a new offering as you are excited to get in on the ground floor. You know what's in it for the fund family to start something new - the chance to suck up assets that would have gone elsewhere - but ask what's in it for you. It could be a quiet closing and a big disappointment."

Lawmakers question mutual fund fees
02/24/03   Funds
"As investors endure painful losses on their mutual funds, two lawmakers are asking whether fund companies might be charging unnecessary fees to maintain their profit margins."

What are Hedge Funds hedging?
02/22/03   Funds
"Not only are hedge funds serving as the marginal buyer and seller, thus setting price, they often make decisions not entirely based on equity valuations or the underlying fundamentals of companies. Instead, decisions are based on the spread to another security, whether a convertible bond, a stock of a company within the same industry or a sector ETF."

Real return bond funds laugh at inflation
02/19/03   Funds
"Real return bonds offer inflation protection that ordinary bonds cannot provide. And for investors who seek that kind of security blanket, there are really only two fund offerings available in Canada." One could also just buy the bonds ...

Canadian mutual funds hit
02/18/03   Funds
"The Canadian mutual fund industry saw a dismal kickoff to the crucial registered retirement savings plan season last month as frustrated Canadians drained $469-million from their funds, according to final January numbers released yesterday."

Investors are main cause of high fund fees
02/12/03   Funds
"The fund companies typically bear the brunt of the resentment, and there are plenty of people wondering when management expense ratios (MERs) are going to fall. It's a good question but it should be directed at financial planners more than mutual fund companies. Contrary to conventional wisdom, planners have a big say in pricing, even if they don't get any heat over it."

Labour funds' greatest risks aren't what you think
02/11/03   Funds
"Labour-sponsored funds are no strangers to criticism, but the nay-sayers don't always shine their spotlights in the right places."

Funds in for the really long haul
02/05/03   Funds
"When you run the same mutual fund for more than 50 straight years, you learn to relax and enjoy a bear market."

America For Less Than 2% a Year
02/01/03   Funds
I focus on the McLean Budden American Equity fund, which presents a good combination of sustained performance and low cost.

Small Caps: A size too big?
01/20/03   Funds
"In 2001, when small-capitalization stocks outperformed large caps, investors poured $28 billion into small-cap mutual funds, but the deluge caused a problem for many small-cap fund managers, writes Virginia Kahn in today's New York Times. As their funds swelled in size, managers found it more difficult to invest profitably in a market of relatively modest size. Many of the most popular funds closed their doors to new investors"

Brace yourself for a wave of mutual fund mergers
01/07/03   Funds
"Sifting through the numbers provided by the Investment Funds Institute of Canada, we find that there were 160 or so fund mergers in the first 11 months of last year. That set a torrid pace of increase, since there were all of eight the year before. The latest four months of numbers showed what mutual fund marketers might call "aggressive growth," with the monthly tally rising steadily from 14 to 37."

New year's resolutions for fund investors
01/06/03   Funds
"Forget about those last five pounds and the work that needs to be done on the house -- it's time for some New Year's resolutions that you really need to make."

Templeton Growth fund may be down but ...
12/26/02   Funds
" Templeton Growth, the country's largest mutual fund, may soon need a new name. Templeton Shrinkage, maybe? Between its losses in the market and fleeing unitholders, this fund has become a lot smaller than it used to be."

How fear rules the fund flock
12/19/02   Funds
"At T. Rowe Price's annual investment briefing earlier this month, Growth Stock fund manager Robert W. Smith worried aloud about investor short-sightedness, saying, "Individuals must stop renting stocks and start owning stocks again." Smith said this trader mentality heightened market instability, and his point was well-taken. Then again, so was a question put to Smith by a reporter: "When do you think fund managers will stop renting stocks and start owning them?""

Are enhanced index funds worth the added cost?
12/19/02   Funds
"Indexing is one of the investing world's great bargains, but enhanced indexing is a whole other matter."

Revealing the secrets of fund turnover
12/10/02   Funds
"Despite all the solemn talk about long-term investing, the average stock fund has a 111% turnover rate, according to Morningstar, the mutual fund trackers. So here's the question: Does all that trading do any good? The answer: Sometimes. But not necessarily with the funds you'd expect."

Lots of consumer help on money matters
12/05/02   Funds
"There are so many financial ombudsman services in Canada now that you can't tell them apart without a program. Seriously. With the opening of the Centre for the Financial Services OmbudsNetwork last week, five agencies are now devoted to protecting the interests of consumers in their relations with banks, brokerages, sellers of mutual funds and insurers."

November sees more fund redemptions
12/04/02   Funds
"The Investment Funds Institute of Canada reported today that, based on a sample of preliminary data from some of its members, net new sales for the month of November are estimated to be between minus $900 million to minus $500 million."

Financial Services Ombudsnetwork running
12/01/02   Funds
"If consumers have concerns or complaints with their providers and are unsure how or where to begin, they can make one call and be put in touch with someone who will guide them through the complaint resolution process."

Pick good mutual funds, then commit to long term
11/28/02   Funds
"If you invest in mutual funds, you're bound to notice a disconnect every so often between your actual returns and those reported by your fund company. While your fund company is boasting of excellent long-term gains, your own funds are up only a little, or maybe they're even down. This, unfortunately, is typical."

Two star managers leave Altamira
11/28/02   Funds
"A shakeup at Altamira Investment Services Inc. sent two of its star fund managers out the door, as the mutual fund company seeks to change direction in the wake of lagging fund performance, heavy redemptions by investors and a recent takeover by National Bank of Canada."

Royal Bond Fund no refuge from stock crises
11/26/02   Funds
"A bond fund sold by one of the big banks is the type of place an investor goes for refuge from stock market disasters such as WorldCom Inc., Adelphia Communications Corp. and Calpine Corp. But if you owned the $1.8-billion Royal Bond Fund, you'd have been exposed to all of these companies in the past while, not to mention the debt of Latin American countries such as Brazil."

Funds still actively trading
11/24/02   Funds
"On average, trading costs added 18 basis points to the cost of a Canadian equity fund (commissions are calculated outside the management expense ratio). Trading costs were constant over the previous two years. Costs are calculated using commissions as a percentage of average assets for two fiscal yearends."

Hedge your fund picks with good information
11/21/02   Funds
"The hedge fund industry likes to portray itself as the investing big leagues, where only the smartest, most skilled money managers get to play. There's some truth to this, but don't take it for granted. Fact is, there are substandard hedge funds out there, just as there are in the mutual fund business. In the past year, at least seven hedge funds have either been wound down or closed. Some had serious losses, while others failed to attract enough assets to make a go of it."

Even stodgy bonds can take nasty bite
11/19/02   Funds
"Things are so twitchy in financial markets these days that even a run-of-the-mill bond fund can rear up and bite you. That's what the $1.8-billion Royal Bond Fund has done to its unitholders recently. The Royal Bank of Canada fund lost 2.9 per cent in the 12 months to Oct. 31, which makes it the third-worst performer among Canada's 118 bond funds over that time period."

October another tough month for fund sales
11/15/02   Funds
"Foreign equity funds remained the biggest target for redemptions in October, with more than $299 million pulled from those funds in the month. Another $231 million came out of balanced funds, and Canadian equity funds lost $195.8 million. U.S. equity funds dropped just $21.5 million. However, investors showed some signs of faith by plowing $110.8 million into dividend and income funds."

Hedge funds: Complex animals that bear special scrutiny
11/14/02   Funds
"Hedge funds can beat a bear market, but sometimes the bear wins, too. At least seven hedge funds in Canada have been closed or wound up in this most difficult year for stocks, some of them with heavy losses. Hedge funds were the hot investment of early 2002 because of their potential to not only protect investor capital in a down market, but also to make money. In fact, many of the 100 to 150 hedge funds available in this country have done just that."

Dividend funds show long-term strength
11/08/02   Funds
"In the waning years of the last millennium, dividend and bond fund managers might as well have been fossils wallowing in a primordial ooze for many investors. One bear market later, however, and those same managers look more like the action heroes of mutual-fund investing."

MFDA launch of investor complaint service
11/06/02   Funds
"The Mutual Fund Dealers Association of Canada announced today that its Investor Complaints Service is now fully operational. Clients of MFDA firms can now complain to the new self-regulator for fund dealers by calling 1-888-466-MFDA (6332) from anywhere in North America. Toronto-based clients can call 416-361-MFDA. Complaints may also be filed over the web site at under Enforcement or by sending a written complaint."

Respect your elders
10/30/02   Funds
"Perhaps a little desperate for a silver lining amid the storm clouds blanketing the stock market, Morningstar gave the 8,169 domestic stock funds it tracks the once-over and found evidence of what most investors should already know: Experience matters."

Managers get rich while investors lose
10/23/02   Funds
"Rip-off? You bet. Not only do these guys lose a lot of your money, every one lost more than the market! Worse yet, these guys are supposed to be hot-shot active managers, yet they are miserably under-performing the market, and they still have the audacity to paying themselves huge salaries while investors lose huge amounts. You'd have been a lot better off in a simple S&P 500 index fund."

Performance is a thing of the past
10/20/02   Funds
"An academic study shows it's not possible to prove decisively that success is down to skill rather than luck."

A look inside fund returns
10/20/02   Funds
"Expenses take a big bite out of the gains of many mutual funds."

Now's the time to get active, brokerage says
10/17/02   Funds
"Canadian authors like Brian Noble (The Index Investing Revolution), and indexing executives Ted Cadsby and Howard Atkinson have come to similar conclusions in their own books: costs matter."

CI merges 33 funds
10/16/02   Funds
""We have reduced duplication within our lineup while maintaining our industry-leading selection of funds," said CI president Peter Anderson, in a news release. "More importantly, the mergers have created larger, more efficient funds, which will lead to savings for unitholders."" -- Oh? Show me the lower MERs!

Five-year losers burn investors
10/16/02   Funds
"Here's a quick test to see if investing in mutual funds is for you. Just ask yourself if you can stand to lose money over a five-year period."

Learning from the Janus blowup
09/25/02   Funds
"Some great disasters make you want to avert your eyes. The Hindenburg. Ishtar. Janus. If you lost money in a Janus fund, you won't get it back anytime soon. But you can make sure you won't get killed again. Before the market cratered, there were signs that Janus was starting to stumble. Of course, few people saw them back then. But a look back at what happened to this firm and its once-mighty funds produces a handy checklist of signals that should help you avoid a Janus-like catastrophe in the future."

Fund flows prove to be a washout
09/23/02   Funds
"Hmm, seems as though post-outflow periods were pretty much typical of their era. In other words, monthly net outflows give no significant signal either way."

The King is dead. Long live the King!
09/23/02   Funds
"In the spirit of this century old refrain meant to calm fears of uncertainty by providing continuity, AGF has replaced the world leading Brandes Investment Partners of San Diego as sub advisor to Canada's star mutual fund "International Value""

Surprising number of big funds escape bear
09/18/02   Funds
"One of the nastiest bear markets on record is nearly 2= years old, but many fund investors are coming through unscathed -- or even ahead of the game."

Mutual funds vanishing at record rate
09/11/02   Funds
"A record number of mutual funds are headed in a new direction: oblivion. Since the bear market began in March 2000, 414 stock mutual funds have been liquidated, says Morningstar, the mutual fund tracker. That's half the liquidations in its database, which stretches back dozens of years and covers 4,074 stock funds. An additional 566 stock funds merged into other funds."

Buy-and-hold strategy's a keeper
08/26/02   Funds
"Buy-and-hold investing? The thinking right now in some quarters is that this strategy is strictly for sheep or, more precisely, the sort of people who sit back while the bear market shreds their portfolios and the investment industry bleeds them for fees and commissions."

Closed-End funds
08/25/02   Funds
"Closed-end funds are another way for an investor to have exposure to equity or fixed-income markets. They are not very popular or well known, especially when compared to their big brothers, open-end funds, which are more commonly known as mutual funds. There are advantages and disadvantages to the closed-end versions. They are a marriage of an exchange-traded fund and a mutual fund."

Dan on hedge funds
08/23/02   Funds
Check out Dan's interesting four part primer on hedge funds
  Hedge Funds: Intro, Fine Points, Returns & In Portfolios.

Building planning
08/20/02   Funds
"There are basic principles that should be a part of every financial plan. This is the "code" of building a financial plan. Some of these principles change over time as more knowledge is gained."

Funds suffer worst 2 months since 1998
08/15/02   Funds
"Eighty-three per cent of Canadian mutual funds reported negative returns in July, with a median return of -4.1%. Although this was marginally better than June's 84% of funds and a median 5% loss, the combined 8.9% loss over the last two months is the worst two-month setback since August 1998."

How not to buy high and sell low
08/13/02   Funds
"Mutual funds are bought and sold on a daily basis. My personal belief is that funds are usually sold for the wrong reason - performance. Having watched fund flows for many years, there is over an 80% correlation that investors chase performance. Simply put, this means that investors tend to buy winners and sell losers. Does this make logical sense if you are supposed to buy low and sell high?"

National Bank concludes acquisition of Altamira
08/13/02   Funds
"The final price tag on the deal was $467.3 million, including repayment of $201.6 million in debt. A portion of the payment was made in the form of shares, namely, 271,000 shares or the equivalent of $8.25 million. The transaction has been approved by all the relevant regulatory authorities."

If slacker funds aren't doing their job, fire them
07/19/02   Funds
"It's time to strike a blow against slacker mutual funds. You'll know them by their higher-than-average management fees and their sub-par returns. Dead weight like this is exactly what you don't need in the current investing environment."

The tortoise & the hare revisited
07/06/02   Funds
"You really can't blame the financial media for their obsession with U.S. large growth companies. First we had the wild one-dimensional market of the 90's and now we're faced with the realities of the Enron, Worldcom, and Andersen Consulting debacles. So naturally the focus at quarter-end is the horrible performance of the S&P 500 and NASDAQ indexes. Two and a half years of negative returns. But we know the market is multi-dimensional, right? Small company and large value stocks have performed so much better over the past couple of years that those asset classes have actually surpassed the high flyers since 1995. Diversification does work."

When value isn't really value
06/27/02   Funds
"Many mutual fund managers must be glad there's no law specifying exactly when they can and cannot use the words "growth" and "value" in their names. Some funds regard themselves as value-oriented, even if their portfolios are made up mostly of what other investors classify as growth stocks. And some funds may invest in "value" stocks yet have "growth" in their names because they are aiming to achieve long-term growth of principal."

ABC monthly commentary
06/25/02   Funds
"Other than the extraordinary firmness of gold bullion, gold-related common shares and selective special situations, the overall market has displayed across the board price weakness."

National Bank swallows Altamira
06/23/02   Funds
"Less than two weeks ago, a long-rumoured acquisition in the mutual fund industry materialized. National Bank of Canada purchased no-load direct fund marketer Altamira Investor Services. While this deal was no surprise to most industry observers, it's a sober reminder of the preference that Canadian investors have for professional advice."

PH&N Canadian Bond Performs
06/21/02   Funds
"Consider this: the fund has been a top quartile fund in 13 of the past 15 years (and second quartile the other two). It has been a top quartile fund over 1, 3, 5 and 10-year time frames."

Investors sell mutual funds
06/18/02   Funds
"Investment companies have recorded back-to-back net monthly redemptions for the first time in seven years as jittery investors yank their money out of mutual funds."

AGF appoints new managers
06/17/02   Funds
"Whenever such a fundamental change in money managers takes place, it's sometimes a challenge to evaluate the change and make a call. I'm still doing more research on these recent changes announced by AGF, particularly on Harris Associates. However, I feel quite confident in vsaying that unitholders of all of the affected funds should resist the urge to sell. This is particularly true of those invested on a deferred sales charge (DSC) basis; or those sitting on big unrealized gains on these funds in taxable accounts"

More quality needed in mutual funds
06/14/02   Funds
"There's nothing in the National Bank fund menu to suggest the presence of any talent that can parachute into Altamira's weaker funds and get things straightened away. But there is something National Bank can easily do to improve things at Altamira -- get out a machete and start consolidating."

SEC may probe hedge funds
05/27/02   Funds
"The Securities and Exchange Commission is starting an investigation into hedge fund fraud and considering tough regulations for the investment pools for the wealthy"

The end of mutual fund dominance
05/20/02   Funds
"Combined with the toll taken by fund costs and the toll taken by market timing, this penalty for adverse selection is the third leg of the unfortunate triumvirate of tolls that has left mutual fund investors in the backwater of the returns earned by the financial markets. If financial advisors do no more than keep your client from paying these unnecessary tolls, you've made a great start on serving them well!"

Warning: Fund stats offer little help
04/20/02   Funds
"So you think all those fancy statistics generated by Morningstar and Lipper for the financial press will help you predict the future performance of a mutual fund? Wrong. Stop kidding yourself, folks."

MERs offer best guide to funds' future peformance
03/20/02   Funds
"Funds that ranked among cheapest in their category by MER generally had a good chance of outperforming over time frames of one, three and five years, the study found."

Beating the market, until the expenses pile up
03/12/02   Funds
"Devastating as the conclusions may be for the fund industry, they contain a silver lining for the rest of us. In contrast to previous studies that found that it was impossible to consistently pick stocks that outperform the market, Professor Wermers shows that not only is it possible, but also that it is not particularly unusual. By creating our own portfolios -- and assuming that we can pick stocks as well as the average fund manager -- we stand a good chance of saving the bulk of the 2.3 annual percentage points spent on fund inefficiencies -- and a betting chance of actually outperforming the market."

Active fund trading costs remain high
01/24/02   Funds
"Many individual investors believe that professionally managed funds have a trading cost advantage over them, but this is not the case. A recent study suggests that smaller volume traders have gained the most from recently shrinking commissions and smaller bid-ask spreads from regulatory changes."

Redemption "iceberg" ahead
12/14/01   Funds
"There were relatively few funds in existence at the time of the 1973-75 bear market and their assets were very small compared to today's giants. Many equity funds dropped 60 or 70% or more in their NAV. Redemptions were handled by the managers without the problems we envision today. However, mutual fund investors were so disheartened by the "moderate" bear market that there were net fund redemptions for the next nine years."

  Articles by
  Norman Rothery

  Growth Investing
  Real Estate
  Stingy Investing
  Value Investing

  Warren Buffett
  Benjamin Graham
  Charlie Munger
  David Dreman
  Martin Whitman
  Tweedy Browne
  James Montier
  John Dorfman
  Prem Watsa
  Francis Chou
  Walter Schloss
  Seth Klarman
  Nassim Taleb
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  James Grant
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