PH&N announce MER reductions

[twa2w]

PH&N LOWERS FUND MANAGEMENT FEES, RE-OPENS VINTAGE FUND
VANCOUVER, BRITISH COLUMBIA – June 25, 2008 — Phillips, Hager & North
Investment Management Ltd. (PH&N) today announced management fee reductions to selected PH&N and BonaVista investment funds, as well as the re-opening of the PH&N Vintage Fund.
On or about June 27, 2008, management fees will be reduced on Series A unitsof seven funds, and on Series F units of 17 funds. Series A units’ management fees will be reduced by between 5 and 35 basis points, while the management fees for Series F units will be reduced by between 3 and 60 basis points. A full list of the fee reductions is set out below.
“PH&N is known for strong long-term performance and low fees,” said John
Montalbano, president of PH&N and CEO of RBC Asset Management Inc. “The feereductions we are announcing today demonstrate that these cornerstones of our firm remain as strong as ever.”
“Moreover, while our strength in serving to the direct-to-investor market is well recognized, the significant Series F fee reductions underscore our support of fee-based advisory relationships.”
On May 1, 2008, PH&N was acquired by RBC.
“RBC Asset Management and PH&N share a commitment to providing
transparency, value and choice for investors,” said Brenda Vince, president of RBC
Asset Management. “Today’s announcement speaks to our leadership in offering verycompetitive pricing for investors, whatever distribution option they choose.”

[Bylo Selhi]

Betchya that just ruined Tom Bradley's day

BTW the full media release with list of funds and their new MERs is here.

[BRIAN5000]

So there is three series A,O, F

A is normal investor and pay .49% for MM Plus Man fees
O is large or institutional pay .02% for MM Plus Negotiated man fees
F is advisor series and pay.... .40% for MM Plus ????


Do I have this right? Anyone know how much you need to qualify for the "O" seires?

[marty123]

Do I have this right? Anyone know how much you need to qualify for the "O" seires?

O would typically be a fund of funds. Ownership of O would need to be contractually negotiated, and other fees might apply. It's not for you and I

[queerasmoi]

Neat stuff.

Just to be sure, this is the "management fee" they are lowering and not the MER, right? I've had trouble with those two numbers being distinct. Maybe someone could explain.

[twa2w]

The management fee makes up part of the MER. Usually but not always the management fee is the largest part of the MER.
If the management fee is 2% this is the fee charged for managing the fund by the fund mgt company. there are other additional expenses that are required to run the fund. these are added to the mgt fee to come up with a total percentage fee that is the MER. Note there are some expenses that are not included in MER. Hpe this makes sense- rushing a bit to get out the door to a meeting.

cheers
J

[queerasmoi]

Okay, I see.

So if the mgmt fee of Community Values Bond Fund is going from .55% to .50%, I'd expect its MER to go from .77% to about .72%.

[Bylo Selhi]

PH&N is known for strong long-term performance and low fees. The fee reductions we are announcing today demonstrate that these cornerstones of our firm remain as strong as ever. Moreover, while our strength in serving to the direct-to-investor market is well recognized, the significant Series F fee reductions underscore our support of fee-based advisory relationships.

Upon reflection, I'm both deeply disappointed and feel cheated by this announcement. The fee reductions on the flagship equity funds (Canadian, Dividend, US, etc.) apply only to F-class shares. Members of the "direct-to-investor market" who hold A-class shares, many of whom have been loyal clients for decades, are forced to keep paying an extra 25bp. And thanks to collusion by the rest of the fund industry we also can't even hold PH&N F-class shares in discount broker accounts.

[BRIAN5000]

I'm both deeply disappointed and feel cheated by this announcement. The fee reductions on the flagship equity funds (Canadian, Dividend, US, etc.) apply only to F-class shares.

This was what I was thinking the little guy gets hammered agian.

[Bylo Selhi]

The response I got from PH&N to my e-mail is not encouraging. Basically there's nothing but the odd crumb for the "direct" investors who made PH&N's success (and eventual sale to RBC) possible. Indeed, the wording of PH&N's response is disingenuous, e.g. in claiming that since F-class unitholders pay an extra ~1% to fee-only advisors, those who invest directly with PH&N still pay the lowest fees of those who invest with PH&N. Sounds like RBC big-bank marketing "logic" to me.

Meanwhile, PH&N is not the only fundco to align themselves with the dark side. Why pay more for Manulife-brand Mawer funds?

One of the existing funds is Manulife World Investment Class, managed by Manulife`s Cooper-Key. It's very similar to Mawer World Investment, a four-time winner at the Canadian Investment Awards for international equity fund of the year.

What is different about the two funds is their fees. The Manulife fund`s management expense ratio, or MER, of 2.75 per cent is close to double the 1.46 per cent the Mawer fund charges. Expect similar price differences with the new Manulife-sponsored funds.

The upcoming Manulife Mawer funds have been touted in Manulife`s news release and in full-page ads in several major newspapers including the Star, as an "exclusive" arrangement. The distinct impression left was that if you deal with a financial adviser and want to buy into Mawer`s expertise, you`ll have to go through Manulife.

This is not true. Both Mawer and Manulife acknowledge Mawer`s no-load class A funds will remain available for sale through full-service advisers. Nor will Manulife monopolize Mawer`s skills among load-fund firms. Mawer currently manages international equities for the Counsel Group of funds, and a Canadian small and midcap fund for the Guardian Group.

The exclusivity agreement prevents Mawer from managing any new funds for Manulife`s competitors and Mawer has agreed to halt sales of its class F funds for fee-based full-service accounts once the Manulife Mawer funds are launched.

In light of the continued availability of the Mawer funds to clients of advisers, the exclusivity Manulife has negotiated is essentially the exclusive right to offer new high-MER funds managed by Mawer. The question investors should ask themselves is: Why pay more for Mawer?

These are not positive developments for Canadian independent investors in actively-managed funds.

[Small Investor Activist]

PH&N and other low fee funds including MB are mostly crap. I've always suspected them of allowing market timing. It doesn't matter what the fee is with some exceptions most mutual funds are crap which is becoming more apparent to everyone.

[adrian2]

PH&N and other low fee funds including MB are mostly crap. I've always suspected them of allowing market timing. It doesn't matter what the fee is with some exceptions most mutual funds are crap which is becoming more apparent to everyone.

WADR (not much) your comment is full of crap (literally and figuratively).

[parvus]

PH&N and other low fee funds including MB are mostly crap. I've always suspected them of allowing market timing. It doesn't matter what the fee is with some exceptions most mutual funds are crap which is becoming more apparent to everyone.

And your alternative is?

[Small Investor Activist]

And your alternative is?

Unfortunately there are few alternatives.

[IdOp]

Why pay more for Manulife-brand Mawer funds?

Maybe the reason is that if, purely hypothetically, Mawer were to turn into the next Portus, then Manulife would have some money on hand to make investors whole?

[NormR]

These are not positive developments for Canadian independent investors in actively-managed funds.

Seems to me that low-fee active funds are stuck in a 'caught in the middle' problem.

Those interested primarily in low fees are moving to index funds. There also seems to be a group of investors who think that even smart active investing is a bad idea; no matter the cost. Again, they're off to indexing.

Those who aren't that interested in fees by definition don't care. They're off getting advice or doing their own thing. A few DIYers might go with low fee active funds but its a fairly small group.

The low cost active guys don't get much benefit from the low fees and they suffer on the sales/distribution side. So, business-wise, selling out can be quite profitable.

Bad news for the few people who want low-fee active funds and, in this case, for F-class advisors.

[queerasmoi]

I noticed the PH&N website is now listing $1000 as the minimum investment on most funds instead of $5000. This information is not yet reflected at my brokerage or Globefund... but it is good to know

[oldguy]

PH&N Joins Forces with RBC Asset Management

[pitz]

Those interested primarily in low fees are moving to index funds. There also seems to be a group of investors who think that even smart active investing is a bad idea; no matter the cost. Again, they're off to indexing.

Are they really NormR? See my post whereby I show that the largest index fund in Canada has had no growth in the past 8 years. At least in the Canadian context, people aren't adopting indexxing. In fact, indexxed assets are being dishoarded as people fail to re-invest cash dividends.

Is the Canadian active fund industry doing any better in gathering assets? ISTM, everyone rotated out of equities in 2001 or so (and into RE, bonds, and income trusts, all of which are bubbles), and only share buybacks (ie: issuer bids) have actually supported the Canadian/US stock markets -- actual non-issuer investors haven't been, at the margin, placing a bid beneath the market.

Despite practically every personal finance columnist in Canada talking trash about XIU and the TSX index in the past few years (first it was 'too much Nortel', then it was 'too much banks', then 'too much oil', etc.), it has still outperformed the average fund in Canada by quite a substantial margin.

[queerasmoi]

I would be happy to diversify into a *low-fee* actively-managed fund as part of an otherwise passive strategy, if the fund is highly uncorrelated to indexes. This would help a rebalancing strategy considerably.

[Bylo Selhi]

Those interested primarily in low fees are moving to index funds. There also seems to be a group of investors who think that even smart active investing is a bad idea; no matter the cost. Again, they're off to indexing.

Are they really NormR? See my post whereby I show that the largest index fund in Canada has had no growth in the past 8 years.

And where I show it's doubled in assets from ~$5B

In any case unlike the US, where Vanguard is the (second?) largest fundco, DIY investing and indexing have yet to make the same penetration in Canada. The reality in Canada is that the vast majority of people invest via advisors and the vast majority of advisors use actively-managed funds with MERs of ~2.5% (in order to get themselves paid.) There are all sorts of threads on FWF that delve into this situation from any number of perspectives.

In fact, indexed assets are being dishoarded as people fail to re-invest cash dividends.

Proof please.

In any case unlike the US, where every broker offers dividend reinvestment down to fractional shares, in Canada only synthetic DRIPs are available and ETFs generally aren't on the synDRIP menu. It shouldn't be hard to see why a small investor might balk at paying a brokerage fee of ~$25 in order to reinvest a distribution of $100 (which means at least a $10,000 position in most ETFs.) And small investors don't generally use IB for several valid reasons

Despite practically every personal finance columnist in Canada talking trash about XIU and the TSX index in the past few years (first it was 'too much Nortel', then it was 'too much banks', then 'too much oil', etc.), it has still outperformed the average fund in Canada by quite a substantial margin.

Yabbut again, the number of people who read and act on that is very small in Canada. The fund industry with its $500+B in assets and $12+B annual MER revenues can afford to advertise heavily to keep things that way.

And since Norm mentioned the F-class funds that would be ideal for cost-conscious active-managed investors, let me respond as I always do: Why do the discount brokers not offer F-class funds to DIYers when (a) those funds are designed for those who don't want advice (or who are willing to pay for advice separately) and (b) the discounters are prohibited by law to offer financial advice? Who forced the discounters into that position in full view of the regulators who are supposed to "protect" us?

[pitz]

In fact, indexed assets are being dishoarded as people fail to re-invest cash dividends.

Proof please.

See that post whereby I showed that XIU and XIC aren't growing. Even at the height of the Nortel bubble, XIU/XIC still yielded ~1%, which would imply that if people were fully re-investing the dividends (on average), growth in unit issuance of 1%/year. XIU/XIC, on their market price, have yielded in excess of 1.7% for the past 3-4 years, and today, well over 2%, meanwhile, since 2000, according to the numbers I presented in the other thread, unit issuance had not grown by even 1%/year.

Since XIU is the largest mutual fund, and the largest index fund, and the lowest cost way for Canadians to invest in the Canadian market, it is a good proxy for determining what exactly is going on. And XIC exhibits similar behaviour.

Yabbut again, the number of people who read and act on that is very small in Canada. The fund industry with its $500+B in assets and $12+B annual MER revenues can afford to advertise heavily to keep things that way.

Sure... And I would suggest that those high MERs and the ignorance of the general public actually helps the returns of ETFs such as XIU since those MERs end up largely in the hands of institutions such as RY, TD, etc. So ETF owners hardly have much incentive, in the macro scheme of things, to be evangelists towards pushing people to ETFs.

Still, I wonder, what's structurally different about the US and Canada, in which, low-cost ETFs are growing their market share of invested assets in the US, but actually shrinking (or remaining flat) in Canada? It can't be 'just' the brokerage commissions...

And since Norm mentioned the F-class funds that would be ideal for cost-conscious active-managed investors, let me respond as I always do: Why do the discount brokers not offer F-class funds to DIYers when (a) those funds are designed for those who don't want advice (or who are willing to pay for advice separately) and (b) the discounters are prohibited by law to offer financial advice? Who forced the discounters into that position in full view of the regulators who are supposed to "protect" us?

Its about keeping profits for those (bank-affiliated) brokers high. Now which side do you really want to be on -- would you personally rather collect high dividends from your bank stocks, or would you like no dividends, but Canadian DIY investors to be somewhat wealthier?

Its kind of like the RE bubble -- you sell your house, you make sure your family and friends have sold theirs, but secretly, you wish that prices remain strong enough for enough new construction to flood onto the market so that prices will collapse a few years down the road so you can repurchase something dirt cheap.