The cheapness of some mutual fund companies! They spend little or nothing on marketing, and what happens? Some rather excellent low-fee mutual funds go unnoticed by many investors.
The Portfolio Strategy column's all-star team of low-fee mutual fund companies aims to fix this problem. These are companies offering funds that combine much lower than average fees with consistently solid returns. If you're looking for core funds for long-term investing, this list makes a good starting point for your research.
The list was compiled by running the universe of Canadian mutual funds through the fund filters on the GlobeinvestorGold website (gold.globeinvestor.com). Equity funds were required to have management expense ratios of 1.5 per cent or less, and bond funds had to come in at 1 per cent or less.
To ensure consistent performance, funds had to rank in the first or second quartile for the past three-, five- and 10-year periods. Quartiles divide funds in a category into four groups according to their returns - the first and second quartiles are where you want to be if you own a fund.
The next step was to organize the remaining funds by the companies that offer them. Only companies offering more than one qualifying fund are included here.
Low-fee winners
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Beutel Goodman & Co. |
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Assets |
Returns (%) |
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|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
American Equity |
41 |
1.41 |
4.7 |
-6.2 |
-1.8 |
-1.9 |
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|
Balanced |
1,308 |
1.16 |
5.6 |
-0.7 |
3 |
5.1 |
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|
Canadian Equity |
1,226 |
1.44 |
9.3 |
-2.5 |
4.5 |
7.8 |
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|
Canadian Intrinsic |
2 |
1.44 |
5.4 |
-3.9 |
3.2 |
6.3 |
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|
Corporate/Provincial Active Bond |
129 |
0.74 |
7.8 |
7.8 |
5.4 |
7.2 |
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|
Income |
1,227 |
0.73 |
6.6 |
7.9 |
5.3 |
6.7 |
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|
Notes: Beutel is a good place to start this survey for a couple of reasons. One, the firm is a definitive example of low-fee mutual fund excellence that accounts for almost 20 per cent of the funds on this list. Another is that it typifies two challenges with many low-fee fund families -- an expensive upfront minimum purchase requirement, $10,000 in this case, and an unfriendly profile for investment advisers. The background here is that Beutel pays much lower trailing commission to advisers(to compensate them for the service they provide clients) than most other fund companies. Advisers who use fee-based accounts -- where clients are charged an account fee of roughly 1 to 1.5 per cent annually -- should be wide open to using the ultra low-fee F-class versions of Beutel funds. F-class funds are specially designed for fee-based accounts and have trailing commissions stripped out. |
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Leith Wheeler Investment Counsel |
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Assets |
Returns (%) |
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|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
Balanced |
58 |
1.18 |
7.8 |
-2.7 |
2.3 |
4.5 |
||
|
Canadian Equity B |
167 |
1.5 |
11.3 |
-6.3 |
3.9 |
7.6 |
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|
U.S. Equity |
25 |
1.34 |
8.5 |
-10.9 |
-4.1 |
-4.2 |
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|
Notes: Vancouver-based Leith Wheeler is your classic low-fee fund company, piggybacking funds for retail investors on top of its core business of managing money for pensions, high net worth individuals and foundations. Leith Wheeler funds are steady-eddies. You'll not often find them at the top of any lists of best-performing funds, but results over the long term tend to be solidly above average. Leith Wheeler pays no trailing commissions and the minimum initial investment is $5,000 if you buy through an online broker (watch out for upfront sales commissions), and $25,000 if you buy directly from the firm. Note: Leith Wheeler funds are not available in Quebec, the Atlantic provinces and the territories. |
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Mawer Investment Management |
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|
Assets |
Returns (%) |
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|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
Canadian Bond |
77 |
0.96 |
5.9 |
6.1 |
4.1 |
5.7 |
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|
Canadian Equity |
117 |
1.26 |
10.3 |
-4.2 |
4.8 |
7.7 |
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|
Canadian Balanced RSP |
180 |
1.01 |
7.4 |
-1.4 |
3.4 |
5.2 |
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|
Canadian Diversified Investment |
85 |
1.02 |
7.8 |
-1.6 |
3.2 |
4.7 |
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|
U.S. Equity |
30 |
1.34 |
-0.4 |
-7.2 |
-3.5 |
-2.5 |
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|
Notes: Calgary-based Mawer is like Beutel Goodman in being good at running all types of funds, including the balanced funds that so often top the fund industry's monthly sales reports. Canadian Balanced RSP and Canadian Diversified Investment are two of the best bargains in Canadian investing today. The former is designed for registered accounts, the latter for taxable accounts. Either way, you're paying an ultra low fee for what amounts in both cases to a well-balanced portfolio in a single fund. No trailing commissions are paid, so mind the upfront sales charges if buying through an online broker. The minimum upfront investment is $5,000. |
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|
McLean Budden |
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Assets |
Returns (%) |
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|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
American Equity D |
876 |
1.25 |
-1 |
-10.3 |
-3.9 |
-2.7 |
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|
Balanced Growth D |
230 |
0.95 |
3.5 |
-2.6 |
2.4 |
3.2 |
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|
Fixed Income D |
142 |
0.65 |
6.6 |
6.6 |
4.3 |
6 |
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|
International Equity D |
40 |
1.25 |
-2.3 |
-11.1 |
-1.7 |
-4 |
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|
Notes: With more than 60 years in money management, McLean Budden has built a fund businesswith some of the lowest fees around to complement its institutional business. Check out the fixed income fund -- a trim MER of 0.65 per cent has been instrumental in providing returns that are regularly well above average. The McLean Budden U.S. and international equity funds are like others on this list in that they're long-term money losers, even as they're category leaders. Note that we're talking here about the D version of MB funds, which are designed for do-it-yourself investors and pay only token trailing commissions to investment dealers. There are more expensive Class A versions of these funds that advisers can sell and receive higher trailers. The minimum investment here is $10,000. |
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|
MD Physician Services |
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Assets |
Returns (%) |
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|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
Balanced |
442 |
1.45 |
11.2 |
-0.9 |
4 |
3.7 |
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|
Bond |
1,592 |
0.97 |
7 |
6.2 |
4.1 |
5.6 |
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|
Dividend |
1,275 |
1.44 |
11.2 |
-1.3 |
3.7 |
6.1 |
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|
Equity |
1,725 |
1.45 |
6.4 |
-7.2 |
1.5 |
4.5 |
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|
Notes: The MD family of funds is available only to doctors and their families. Outside managers are used, which usually suggests fees on the high side (everybody has to be paid, right?). In this case, however, fees are quite reasonable. The minimum upfront investment is $3,000. For some reason, the biggest fund in this family is MD Growth, a global equity fund that hasn't been very good in recent years and thus didn't make this list. |
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Phillips, Hager & North |
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|
Assets |
Returns (%) |
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|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
Balanced D |
723 |
0.86 |
6.3 |
-2.7 |
2 |
2.6 |
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|
Bond D |
804 |
0.58 |
8.4 |
6.9 |
4.9 |
6.4 |
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|
U.S. Growth D |
44 |
1.24 |
1.2 |
-9.8 |
-4 |
-5.1 |
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|
Notes: PH&N is part of Royal Bank of Canada's fund operations, but it retains its position as a leader in low-fee investing. The D series of PH&N funds are designed for do-it-yourself investors and they pay minimal trailing commissions. The minimum investment is $5,000 if you buy through an investment dealer and $25,000 if you buy directly from PH&N. There's a C series that pays trailing commissions and thus have somewhat higher MERs. PH&N Bond is worth singling out as one of the best fund values in the country. PH&N's Total Return Bond Fund looks good, too, but it lacks the 10-year track record required for inclusion here. |
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RBC Asset Management |
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Assets |
Returns (%) |
|||||||
|
Fund |
($million) |
MER (%) |
One Year |
Three Year |
Five Year |
10 Year |
||
|
Advisor Canadian Bond |
151 |
0.9 |
5.8 |
6.3 |
4.2 |
5.7 |
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|
Monthly Income |
7,058 |
1.14 |
8.5 |
1.6 |
4.8 |
8.4 |
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|
Notes: RBC Asset Management is the country's largest fund company and thus a borderline addition to this list with just two funds. One of them is a small bond fund that uses a quasi-index strategy to good effect. Note that the minimum upfront investment is steep at $10,000. RBC Monthly Income is a Canadian neutral balanced fund that also ranks among the best fund bargains in the country. The minimum investment here is $500, and the fund is only available for non-registered accounts. |
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Rob Carrick