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Stingy News: Funds

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

The case of covered calls
11/25/23 Markets Funds
"Because the covered call strategy eliminates the upside potential, it produces negative skewness of returns (the kind investors dislike). And while it is true that a covered call strategy reduces kurtosis (fat tails), the problem is that it eliminates the potential for the good fat tail (the one to the right) while having no impact on the risk of occurrence of the bad fat tail (the one to the left), only reducing its size by the amount of the premiums collected."

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."

Automatic enrollment
04/16/23 Retirement Funds
"In 2006, nearly one-quarter of participants ages 18 to 24 had no equity exposure. In 2021, 97% of automatically enrolled Generation Z participants had an equity allocation between 41% and 99%." [pdf]

The easy way to returns
01/17/23 Thrift Indexing Stingy Investing Funds
"Slashing fees is an easy, and practical, way to boost long-term returns and it explains the popularity of low-fee funds and very low-fee index funds in particular."

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."

Wise words from Walter Schloss
03/13/22 Schloss Value Investing Funds
"A fee structure, by the way, that would make any fund managers squeamish. Schloss believed his pay should be tied to success. So he got 25% of realized gains. But if there were losses, his limited partners were made whole before he earned a cent. He only got paid when his partners made money."

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 Markets Value Investing 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."

Goodbye upside
01/16/22 Indexing Markets Funds
"I was shocked when I saw the 2021 performance of Global X Nasdaq 100 Covered Call ETF (symbol: QYLD) compared to that of the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100. The Global X fund was up a paltry 10% last year, while the Invesco ETF soared 27%."

Model portfolios
01/09/22 Indexing 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."

Indexes proliferate
05/30/21 Indexing Funds
"The lines have blurred between what constitutes an index and what is simply another active investment strategy"

Deferred sales charges banned
05/09/21 Brokers 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."

Morningstar's influence on style returns
01/16/21 Markets Funds
"But with the introduction of the style box, Morningstar at least managed to reduce the amount of flows chasing past performance. And this apparently also influenced style returns. If investors put a lot of funds to work in funds that had strong performance in the past, they create a herding effect that perpetuates the price momentum of past winners."

Hidden world of failure
10/24/20 Behaviour World Funds
"This hidden world of failure helps to create a deeply flawed understanding of the universe. By not seeing failure, we misunderstand the elements of success."

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 Value Investing 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."

O'Shaughnessy Q4 2019 letter
01/17/20 Markets Value Investing Funds
"our updated in-house 10-year point estimate for the U.S. market's nominal total return fell during the year, and now sits at ~1.5% annualized, which would mean a ~16% total return over the next decade."

Compounding machines
11/08/19 Value Investing Funds
"Join us for a rare interview is Chuck Akre and John Neff of Akre Capital Management" [video]

The great fee war
10/04/19 Indexing Brokers Fees Funds
"Fund fees get lower by the year. We now have access to more strategies, fund types, and geographies at a low cost than any investor class in history. Technology in the space has improved by leaps and bounds. And the frictions of creating and managing a portfolio continue to fall. These are all wins for the investment consumer at the expense of the investment producer"

Dan talks to Morningstar
10/04/19 Hallett Funds
"you would think that maybe high net worth investors, say, $500,000 or more for portfolio size, would allow them to get access to better advice. And yet, I've seen a lot of instances, again, anecdotal, where they're getting, I would say, poor advice" [video]

Jim Mitchell on microcaps
09/24/19 Value Investing Funds
"His fund documents illustrate just how unusual his strategy is. They refer to market capitalization 'below $100 million,' no 'quarterly SEC filings,' and average holding periods of 'more than five years.' This is not a typical investment vehicle. But he has been at it for more than 38 years and racking up impressive returns in the process."

All-in fee of top investment advisors
08/31/19 Brokers Fees Funds
"When added to the management fee of 1.0%, the average advisor has an all-in cost of 1.5% per year."

Mind the Gap 2019
08/19/19 Behaviour Markets 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)."

After-tax alpha
01/01/19 Taxes Funds
"The costs of our active strategies are high enough without paying Uncle Sam. Capital gains taxes, when combined with transactions costs and fees, make indexing profoundly advantaged, I am sorry to say."

Humans love a narrative
12/10/18 Value Investing Funds
"What that means is that if you can eliminate companies with really bad balance sheets or really poor quality businesses, or that are trading at crazy expensive multiples, then you can gain a lot versus the broad market as opposed to simply buying the absolute best balance sheets or the companies with the highest returns on capital."

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."

Active vs. index investing
09/24/18 Hallett Funds
"The vast majority of investors can benefit from qualified professional advice that integrates wealth planning with investment management. This includes a robust discovery process, goals-based planning and a portfolio designed around these important inputs. The value of this combination is so significant over time that it can render the active vs passive debate almost meaningless."

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."

Cliff Asness interview
06/25/18 Momentum Investing Funds
"AQR Capital's Cliff Asness, a rare combination of Great Investor and Financial Thought Leader shares his views and strategies."

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."

Wes Gray on QVAL
12/18/17 Indexing Value Investing Funds
"Wes Gray, CEO of Alpha Architect, says he searches the 'trash bin' for companies in order to find 'deep value' in the QVAL ETF. He joins Bloomberg's Scarlet Fu and Eric Balchunas." [video]

Bill Nygren Talks at Google
12/18/17 Value Investing Funds
Oakmark fund manager Bill Nygren talks about value investing at Google. [video]

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."

The front test
09/11/17 Indexing Markets Funds
"The biggest problem for investors is never finding a good backtest. That's the easy part. The hard part is passing the front test by understanding your parameters, filters, and guidelines enough to be able to implement it in the real world and stick with it when it's out of favor."

Chou's letter
09/02/17 Value Investing Chou Funds
"we believe pharmaceutical stocks as a group are selling at attractive valuations, in comparison to the free cash flow and earnings they generate. The recent price drops may present one or more attractive long-term investment opportunities"

Business vs investing
08/16/17 Indexing Markets Funds
"My guests this week are both veterans of the podcast, Jason Zweig and Morgan Housel. They are two of the best in the world at making the complicated simple..." [audio]

ETF ratios
08/16/17 Indexing Funds
"Depending on how you calculate the average, subtracting the large losses of a few companies from the combined profits of the others can leave a much smaller total of net earnings to go around. That can make the index look more expensive than it effectively is."

Robert Robotti Interview
07/30/17 Value Investing Funds
"Robert Robotti on the role of active management in the modern world" [audio]

Tie me down and make me rich
07/30/17 Behaviour Funds
"Back in the 1980s, Twentieth Century Gifttrust, a fund specializing in small growth stocks with high potential returns and equally high risks, required investors to sign a legally binding contract that locked them into ownership for a minimum period - often 10 years and more. Investors loved the fund during the bull market of the 1980s and 1990s, often boasting about how satisfying it was to own a fund that would protect them from their own worst instincts to bail out every time there was a temporary downdraft in the Dow. Then came the bear market that began in 2000, in which Gifttrust generated huge losses. The same investors who had liked being bound to the fund suddenly hated it."

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"

The math behind futility
05/28/17 Markets Indexing Funds
"The distribution of returns in the stock market is bizarrely lopsided. Often, equity benchmarks are so reliant on gigantic gains in just a handful of stocks that missing them - as most managers do - consigns the majority to futility."

The bet with Buffett
05/07/17 Indexing Buffett Funds
"Ted and I discuss the origins of the bet, the nuances beneath the headlines, and whether he'd make the bet again for the next ten years. Along the way, we cover many hot topics like hedge funds, alternatives, fees, and indexing." [audio]

Index fund contrarian
05/07/17 value investing indexing 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]

Best mutual fund disclosure
03/19/17 Zweig Funds
"While the long-term bias in stock prices is upward, stocks enter a bear market with amazing regularity, about every 3 - 4 years. It goes with the territory. Expect it. Live with it. If you can't do that, go bury your money in a jar or put it in the bank and don't bother us about why your investment goes south sometimes or why water runs downhill."

Chuck Akre talks at Google
03/12/17 Value Investing Funds
"Chuck talks about compounders at Google."

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 Indexing 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."

Lessons from a short seller
01/02/17 Markets Funds
"Wilson managed a hedge fund - Wilson & Associates - that he launched in the late 1960s. During his career, his fund generated annualized returns of about 30%. His net worth peaked at $800 million, most of which he donated to charity."

WealthTrack: Arnott interview
12/11/16 Indexing Funds
"When 'smart beta' investing can be dumb. Financial innovator and thought leader, Research Affiliates. Robert Arnott warns about pitfalls with the popular strategy he helped create." [video]

The three coolest studies of 2016
12/11/16 Academia 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 Value Investing 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]

Turning over accepted wisdom
10/16/16 Indexing Funds
"How many of us often just cite 'the average can't beat the average' and move on assuming we've smashed whoever we were debating? I know I have done it many times. Sharpe's insight is, in my opinion, likely still mostly true, perhaps entirely true. But Lasse has, at the very least, created some doubt for me in something I was pretty sure about."

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."

John Oliver: retirement plans
06/19/16 Retirement Fun Brokers Funds
"Saving for retirement means navigating a potential minefield of high fees and bad advice." [video]

Two-star managers
06/04/16 Behaviour Funds
"When I said I would love an interview series with 2-star fund managers, the most common response was 'just go watch the 5-star interviews from a few years ago.'"

The high price of low vol
05/08/16 Markets Indexing Funds
"If you buy a 'low-volatility' fund, make sure you're comfortable paying a higher price. That's the warning that emerges from the surge in popularity of funds specializing in stocks that fluctuate less than the stock market as a whole."

Popular at a price
05/01/16 Indexing Funds
"BlackRock hasn't just ignored the fee war. It has raised EEM's fee - a practically unheard move for an ETF. EEM used to charge 0.67 percent. Now it charges 0.69 percent - a rare case when a popular ETF charges more than (gasp) the average active mutual fund."

Chou Funds letter
04/10/16 Value Investing Funds
"It is hard for us to believe that RFP is trading as low as $4 per share."

Alpha or assets
04/10/16 Value Investing Funds
"With fees lower across the board, scale becomes a more important consideration for asset managers when deciding what strategies to offer the investing public. When fees fall, assets need to rise. For assets to rise across a business, the strategies offered need to be able to accommodate more invested money."

Curse of the benchmarks
04/02/16 Behaviour 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."

When trading detracts from alpha
03/28/16 Markets Funds
"Whether you decided to invest in actively managed funds, or you were forced to invest in them (maybe because of limited choices inside of corporate retirement plans), you should choose funds not only with low expense ratios, but also with low turnover rates. Those choices will at least reduce the very high odds against generating alpha (risk-adjusted outperformance)."

RBC fund became a tax headache
03/19/16 Taxes Funds
"RBC had triggered the capital gain - and a related one in 2014 - when it sold the fund's individual stocks and bonds and replaced them with RBC's own mutual funds."

Chasing returns
02/21/16 Indexing 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."

The Cost Matters Hypothesis
02/21/16 Indexing Behaviour Thrift Funds
"While markets' efficiency will be forever questioned, there is no question that the costs we incur in investing deduct directly from our returns - it's simple subtraction."

Dorfman's robot
01/22/16 Dorfman Value Investing Funds
"Are you better off with a robot? Dorfman Value Investment's John Dorfman discusses why his robot list performs so well" [video]

The robot portfolio
01/22/16 Dorfman Value Investing Funds
"The Robot boasts a compound average annual return of 15.58 percent, compared to 4.17 percent for the S&P 500. Figures include reinvested dividends. The cumulative return for the Robot stocks has been 1,119 percent, versus 123 percent for the index."

Sequoia sued over Valeant stake
01/16/16 Value Investing 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."

Balance your portfolio With care
12/05/15 Bonds Markets Funds
"As for generating inflation-fighting returns, it's hard to see how bonds will do the job. A reliable predictor of future bond returns is the current yield. Today, that means a real return (after inflation) around zero. There will be periods when bond prices rise due to interest-rate declines and/or events in the corporate market, but their long-term returns are anchored by low yields."

High-payout fund trickery
12/05/15 Hallett Funds
"In the world of investing, nothing turns my stomach more than when a member of the investment industry misleads investors and then directly benefits from said misinformation. Usually only subtle trickery is at play. And most often I have seen this in the form of funds sporting unsustainable cash payouts"

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."

The ability to suffer
10/18/15 Value Investing Norman Rothery Stingy Investing Funds
"The capacity to suffer for a good cause is admired in heroes. But it also happens to be a quality that money manager Thomas Russo, of Gardner Russo & Gardner, looks for when selecting stocks. He's a devotee of Warren Buffett and seeks out high-quality businesses - that can withstand a few sword fights - with the view to holding them for the long term." [$]

How not to wipe out with momentum
10/03/15 Indexing Value Investing Momentum Funds
"Front runners and high transaction costs, a function of the strategy's required high turnover, largely destroy the potential benefits of a momentum-based passive portfolio."

The active share debate
10/03/15 Academia Funds
"There is an interesting discussion in the geeky world of academic finance literature between the intellectual muscle at AQR and academia."

Chou Semi-Annual 2015
09/02/15 World Value Investing Funds
"The current conditions make me feel that investors are being set up for heartbreaking disappointment, especially for the unwary."

Mind the gap 2015
08/16/15 Behaviour Funds
"Overall, the average investor return across all funds was 5.61% for the cheapest quintile and 3.28% for the priciest. The gap was 80 basis points for the cheapest quintile and 179 basis points for the priciest."

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."

Woe betide the value investor
06/06/15 Behaviour Value Investing Funds
"Alas, the fund manager's profession is abysmally depressing. You are regularly reminded by academic research that, on average, you destroy value, net of fees; a monkey randomly selecting stocks, or a cap-weighted index, outperforms you. (Sort of makes you question the value of your MBA degree and CFA designation.) Nor are the select few who have delivered long-term outperformance spared. New evidence suggests that your clients' decisions undo your work, so that, in the end, your contribution to their financial well-being is still quite negative. Your time-weighted returns may be superior, but the dollar-weighted, net-of-fee returns the clients actually receive are nonetheless adverse."

Timing poorly
06/06/15 Academia Value Investing Behaviour Funds
"Value investing is viewed as a historically successful investment strategy. The literature generally agrees on the robustness of the strategy but disagrees on the explanations for the success. While the empirical research focuses exclusively on the time-series returns - or the buy-and-hold return - of a value portfolio, the investor experience is, of course, driven by the internal rate of return (IRR) - or the dollar-weighted average return. Although the buy-and-hold average portfolio return may be the proper way to document the anomaly, the dollar-weighted average return can shed light on some interesting questions which cannot be addressed by analyzing the buy-and-hold returns. In particular, examining the dollar-weighted returns allows us to ask whether investors have actually generated superior IRR consistent with the reported buy-and-hold outperformance of value strategies."

Q&A: Mawer vs Vanguard
05/27/15 Indexing Stingy Investing Funds
"Should investors opt for low-fee active funds that have outperformed in the past. It's a good question. Here are a few of my thoughts." [video]

To hedge, or not to hedge
05/04/15 Indexing Hallett Funds
"ETFs provide many options for hedging, but you need to ask whether or not this is necessary for your clients"

Lifting the hood on low-volatility ETFs
05/02/15 Indexing Hallett Funds
"These ETFs are designed to smooth the ride for risk-adverse clients, but take the time to understand the strategy"

How fees, taxes, and inflation impact returns
03/20/15 Taxes Markets Indexing Stingy Investing Funds
"It is vitally important for investors to reduce, where possible and legal, investment-related fees and taxes. Those who don't might wind up taking all the risk and getting very little in the way of real returns." [video]

Advisors behaving badly
03/20/15 Hallett 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.)"

Sequoia Fund 2014 report
03/14/15 Value Investing Funds
"One reason we think the trend could have legs is that markets continue to grow more efficient. Our colleague Greg Alexander likes to say 'the Index is a lot better than it used to be.' U.S. corporate managements are generally competent and focused on creating shareholder value. There are not a lot of mutts left in the kennel, so to speak, so winning the dog show is harder."

Hunting for value in the stock market
03/01/15 Value Invesing Dividend Investing Stingy Investing Funds
I was very pleased to give a talk to the friendly folk at a Canadian MoneySaver conference this weekend. Here's a copy of the slides that were used. (I'd also like to thank everyone who gave me feedback on them!)

Cliff Asness interview
03/01/15 Asness 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."

The Impact of Fund Fees on Long Term Returns
02/06/15 Thrift Stingy Investing Funds
"A quick look at how much you give up by picking a high fee fund and holding it over the very long term." [video]

Check out low-fee balanced funds
01/03/15 Stingy Investing Funds
"If you're just getting into the markets then it's best to test the water by putting a small amount of money into a balanced fund. If the ride proves to be too wild then it's an easy matter to lean more heavily on bonds and GICs. Alternately, those who don't mind the ups and downs might tilt their portfolios a little more heavily to stocks. Either way, it's a valuable lesson to learn before putting a large amount of money at risk."

Doubling down
11/23/14 Markets Academia 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 Academia 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 Zweig 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."

Diversify with Warren Buffett
06/29/14 Value Investing Buffett Indexing Stingy Investing Funds
"Berkshire Hathaway represents an interesting option for cost-conscious investors who want to pick up a diversified collection of businesses in one handy package."

Meet Francis Chou
05/04/14 Value Investing Chou Stingy Investing Funds
"It's a pity more money managers don't follow Mr. Chou's example. But investors would be wise to follow him."

Index funds trade too much
04/19/14 Indexing Markets Stingy Investing Funds
"The problem is, most index funds are too active. Sure, specialty index funds must trade stocks frequently in an effort to track small segments of the market. But some of the biggest and most beloved indexes trade too often."

Financial advisor fees
04/12/14 Brokers Zweig Funds
"The Wall Street Journal's two top personal finance journalists, Jonathan Clements and Jason Zweig, both now at The Wall Street Journal tackle the three greatest financial challenges facing Americans. [video]"

Fund risk rating reform
04/05/14 Hallett Funds
"More importantly, the rating doesn.t adequately inform investors about the risks that lie ahead during the next credit market freeze or when the PIMCO managers show their humanity and get some of their bets wrong. PIMCO is following the rules. But assessing this as a low risk fund simply shows the inadequacy of the status quo that so many fund companies have argued to maintain."

When hedge funds lobby
03/15/14 Government Funds
"The worrying thing is that the Ackmans and Westhuses of this world have discovered what you might call the Buffett Arbitrage. Rather than investing in advertising or capital stock, they invest instead in lobbying, with the aim of getting very specific legislation passed which will make them very rich."

Making sense of experts' picks
03/02/14 Hallett Funds
"Among the flurry of recommendations, it's important to keep a few things in mind in the spirit of sound portfolio construction."

The Glidepath Illusion
03/02/14 Markets Retirement Arnott Funds
"Rob Arnott explains why target-date funds fail to either maximize wealth or minimize uncertainty about future income."

Survivorship bias
02/16/14 Stingy Investing Funds
"Focusing solely on the winners can lead to a dangerously skewed view of the world. It's a particularly acute problem in the markets, where luck often plays an important role. Problem is, the market tends to bury its failures, which slip out of both sight and mind. Investors who don't account for them may find their decisions swayed by survivorship bias. It's a factor that fund investors should be particularly wary of."

Smart beta needs to come out of the closet
02/08/14 Indexing Hallett Funds
"Some suggest that Smart Beta blurs the line between active and passive management. But it's clear to me that Smart Beta is simply active management in disguise."

Volatility and mutual fund manager skill
01/26/14 Academia Funds
"Low volatility mutual funds outperform high volatility funds to a remarkable degree, and, in a standard four factor framework, past volatility is a reliable, persistent, and powerful predictor of future abnormal returns. Analyses patterned after Kosowski, Timmerman, Wermers, and White (2006) and Fama and French (2010) indicate that low volatility fund managers have significant skill. However, the addition of a factor contrasting returns on diversified portfolios of low and high volatility stocks eliminates differences in risk-adjusted performance. We conclude that either our volatility measure is associated with a pervasive, systematic pricing factor, or else the volatility effect is a market inefficiency of extraordinary size. Either way, failure to account for the volatility effect can lead to substantial mismeasurement of fund manager skill."

Graham & Doddsville: Fall 2013
10/13/13 Value Investing Behaviour Funds
Be sure to read the Guy Spier interview: Build Your Life in a Way That Suits You

How to choose an actively managed fund
09/22/13 Stingy Investing Funds
"There is a myth going around that most fund managers are bad stock pickers. It is undoubtedly true that some are, but it turns out that most beat their benchmarks over the long term."

Industry risk rating failing investors
09/22/13 Hallett Funds
"Floating rate note (FRN) funds are gaining in popularity because of their marketed 'promise' to protect capital during periods of rising interest rates. In Canada since the mid-2000s, FRN funds invest mainly in corporate loans bearing a fluctuating interest rate. They appeal to investors who fear rising interest rates - which is most - but offer competitive current yields. Investors seduced by this class of funds should be aware that hedging one risk often heightens exposure to other risks. And standard industry risk ratings fail to communicate this trade-off, which risks significantly understating these funds' true risk exposure."

Risk-free returns for everybody
09/22/13 Thrift Funds
"Investment professionals too often forget that a dollar saved in costs or fees is actually worth more than a dollar earned from investment returns (thanks to taxes). In addition, investing in cost and fee reduction can provide far greater returns per unit of risk than anything else an investment organization can do. In fact, there.s an argument to be made that cost and fee savings represent risk-free returns to investors."

Francis Chou seminar
09/05/13 Value Investing Funds
"Francis talks value at the Ivey business school"

The case for low-fee balanced funds
08/04/13 Indexing Behaviour Stingy Investing Funds
"While balanced funds aren't a cure-all for the ails of market timing, they do represent a useful tool for new investors and for those who get a little jittery in downturns. When shopping for balanced funds it is important to keep a close eye on the fees they charge. All too many funds offered to Canadians charge outrageously high fees."

Hedge fund math
07/21/13 Thrift Stingy Investing Funds
"The lesson here is to try to minimize your costs and employ sensible tax planning methods. While a 2-per-cent annual fee might not seem like much, it can really add up over time. Throw in a performance fee on top, as most hedge funds do, and the costs skyrocket." [Btw, the calculations included a high-water mark]

This fund is likely to chop its payout
06/01/13 Dividends Hallett Funds
"I continue to be amazed by some of these products that pay out fat monthly cash amounts. I know of this fund but have not followed it closely. When I first looked it up in response to Derek's note, the sub-$4 unit price prompted me to double check to make sure I had the right fund. But such is the (negative) power of overdistributing - particularly in a volatile fund. IA Clarington Canadian Dividend is entirely invested in stocks (unlike the many others I have reviewed and analyzed, which were balanced funds with stocks and bonds)."

Vanguard total int'l bond fund
05/05/13 Bonds Indexing Funds
"The latest filing provides additional details on the fund that.s designed to track the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (dollar hedged), and will tap into a universe of 7,000 high-quality corporate and government bonds from 52 countries."

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."

Chou's 2012 letter
03/30/13 Value Investing Funds
"In general, we are not that bullish on the stock market. Aside from a couple of industries like the financial institutions in the U.S. and companies in the retail sector, we are not that comfortable with the prices of many stocks."

Fishing for value
03/30/13 Value Investing Funds
"There are generally three scenarios under which they buy into a company - it's ignored by Wall Street, is misunderstood by investors, or has suffered from panic selling."

How not to run a pension fund
03/03/13 Government Funds
"I love alternative investments. I love Wall Street. I don't mind paying fees. But I want returns."

Mohnish Pabrai interview
02/24/13 Value Investing Funds
"I don't invest in technology stocks because I understand it. Basically, Buffett would say that he doesn't invest in tech businesses because they are subject to change. Industries with rapid change are the enemy of the investor. Tech businesses, particularly biotech, is a problem from that point of view. All industries work with change but you should ideally be investing in businesses with a low rate of change, not a high rate of change."

Why investors lag funds
02/16/13 Behaviour 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."

Tetanus for Tim?
02/09/13 Value Investing Stingy Investing Funds
"Spartan accommodations are one reason I became interested in a stock owned by money manager Tim McElvaine. He quipped that he felt the need to get a tetanus shot before visiting the aging headquarters of the company"

Francis Chou on value
02/03/13 Value Investing Funds
"What keeps you awake at night? I worry if my valuations are wrong. If they are wrong, then you don't make money. I am looking for something that I believe is worth 100 cents, but which I can buy for 50 or 60 cents. But is my 100 cents accurate? Did I miss something? Is the earning power there? Are the assets really worth what they're saying? And is management honourable, or will they run off with the money?"

Biggest controversy with commissions
01/26/13 Hallett Funds
"Type the phrase 'financial advisor commissions' into Google and the results will be less than flattering to the financial advice industry. Understandably, regulators and the media are focused on full service brokers or financial advisors when this issue arises. But there is a good reason for both parties to cast their eyes on another closet door concealing a well-kept secret."

Advice to the lazy investor: Be even lazier
01/01/13 Indexing Behaviour Stingy Investing Funds
"A peculiar investment trust put the buy-and-hold experiment into practice many years ago. The trust takes passivity to such an extreme that it makes many index investors look like a bunch of drunken day-traders."

Small, illiquid, value
12/23/12 Value Investing Markets Stingy Investing Funds
"While the return potential of small value stocks is well known, the benefits of low liquidity may be less obvious. That's why I was pleased to read a study on the topic by Roger Ibbotson, and others, in the latest Financial Analysts Journal, which dissects mutual funds."

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."

The risky new world of ETFs
08/11/12 Indexing Stingy Investing Funds
"A little more than a decade ago ETFs were rare things. The few that were available were much like the chocolate and vanilla of the investment world - plain but satisfying options. They tracked the big indexes and charged relatively low annual fees (MERs). If you pointed new investors to ETFs in those days, they would likely find reasonable funds on their own. But that was then."

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 Indexing 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!"

Think garage sale
07/30/11 Value Investing Stingy Investing Funds
"Fling open your closets and clear out your basement because it's garage sale time. If all goes well you might be able to shift the contents down the street. In my neighbourhood, you also get the chance to buy sugary pools in flaky cups from the friendly butter-tart lady. But the humble garage sale yields more than sugar-rush-inducing treats. It can offer lessons for stock investors."

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"

Your Roadmap to Investment Success
02/07/11 Value Investing Dividends Stingy Investing Funds
"I was pleased to talk at The Investment Show where I made the case that novice investors should opt for low-fee balanced funds. I then moved on to more advanced topics including dividend investing and value investing. Here are the slides that were used..."

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."

Roads to Investment Success
12/05/10 Value Investing Dividends Stingy Investing Funds
"I was pleased to talk to the University of Toronto Faculty Association where I made the case that novice investors should opt for low-fee balanced funds. I then discussed more advanced topics in dividends and value investing. Although the session was not recorded, here are the slides that were used..."

The Hidden Costs of Indexing
10/27/10 Indexing Funds
"Petajisto estimated that from 1990 to 2005 the annual turnover drag for the small-cap Russell 2000 was at least 0.38%-0.77% and for the S&P 500 at least 0.21%-0.28%. Researchers Honghui Chen, Gregory Noronha, and Vijay Singal in a 2005 paper estimated the cost of index turnover drag at 1.30%-1.84% for the Russell 2000 and at around 0.03%-0.12% for the S&P 500. These figures imply that index funds that don't slavishly follow the index can beat their benchmarks by avoiding the price pressure surrounding index additions and deletions. It's one of those rare free lunches in investing."

Hidden Cost for Index Funds
10/27/10 Academia Indexing Funds
"This paper empirically investigates the index premium and its implications from 1990 to 2005. First, we find that the price impact has averaged 8.8% and 4.7% for additions to the S&P 500 and Russell 2000, respectively, and -15.1% and -4.6% for deletions. The premia have been growing over time, peaking in 2000, and declining since then. Second, the implied price elasticity of demand increases with firm size and decreases with idiosyncratic risk, supporting theoretical predictions. Third, we introduce a new concept that we label the index turnover cost, which represents a hidden cost borne by index funds (and the indexes themselves) due to the index premium. We illustrate this cost and estimate its lower bound as 21-28bp annually for the S&P 500 and 38-77bp annually for the Russell 2000."

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."

Tim's 2010 Conference
08/02/10 Value Investing Funds
"Glacier, Indigo, EGI Financial, Sun-Rype Products and Arlington, which is a little bit of a special situation. But all of these companies, I think, are really through any restructuring. They're somewhere in various stages of cash generation or discovery, and whether or not we sell them or not, depends an awful lot on the price they're trading at."

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."

Sticking to what works
07/06/10 Value Investing Funds
"This month Sequoia Fund marks its 40th anniversary. It's a milestone rarely achieved in an industry where three years is considered long term. Even more remarkable is that Sequoia is being run pretty much the same as it was when Warren Buffett's friend and stockbroker, the late Bill Ruane, launched the fund in 1970. It's still a concentrated portfolio with two or three dozen stocks, all heavily researched and bought with the idea that the market is valuing them at less than their true worth. Co-managing the fund is Robert Goldfarb, whose tenure at the New York firm dates back to 1971."

Do your homework
04/29/10 Indexing Hallett Funds
"The average mutual fund investor pays about 2 per cent annually in management fees, operating expenses and taxes. The average investor in TSX-traded ETFs pays closer to 0.4 per cent a year. The average potential cost savings, then, are about 1.6 per cent per annum. But this is only available to do-it-yourself (DIY) investors. Otherwise, investors who need professional advice have to pay for it either through higher product fees or fees paid to an adviser in addition to ETF expenses. The 2 per cent average mutual fund fee generally includes compensation for advisers, whereas ETF fees do not include the cost of obtaining advice. So-called fee-based or fee-only advisers charge a fee equal to 1 per cent to 1.4 per cent of your portfolio value. Add that to ETF fees and taxes and you've got total annual fees of 1.5 per cent to 1.9 per cent annually. Wave goodbye to that fee advantage."

ETF clutter
04/17/10 Indexing Funds
"For starters, when investors are looking for "simple and transparent," ETFs are no longer the default. There still are many clean, easy-to-understand ETFs to be had, but they're harder to find among the proliferation of new products. Indeed, ETFs no longer take a back seat to closed-end funds or mutual funds when it comes to complexity, opaqueness and fine print."

Measuring investor sentiment
04/11/10 Markets Academia Funds
"We investigate a proxy for monthly shifts between bond funds and equity funds in the USA: aggregate net exchanges of equity funds. This measure (which is negatively related to changes in VIX) is positively contemporaneously correlated with aggregate stock market excess returns: One standard deviation of net exchanges is related to 1.95% of market excess return. Our main new finding is that 85% (all) of the contemporaneous relation is reversed within four (ten) months. The effect is stronger in smaller stocks and in growth stocks. These findings support the notion of "noise" in aggregate market prices induced by investor sentiment."

Chou's 2009 letter
03/26/10 Value Investing Funds
"we believe that investment and non-investment grade corporate bonds are now fully priced. It is similar with equities. Most stocks are now close to being fairly priced and it is harder to find bargains. Although we won't likely see the lows that we saw in February/March of 2009, the risks of investing in equities are greater now."

Reward for punishment
03/20/10 Behaviour 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."

McElvaine annual
03/06/10 Value Investing Funds
"Going forward, I expect that you will see more money invested outside of Canada and in larger companies. This is not particularly a change; I'm just going back to my Cundill roots to some extent. In the past couple of years, when Canadian ideas were slim, rather than invest outside of Canada, I superconcentrated and stayed invested in small caps. This clearly had painful results. While we will continue to have a significant small-cap portfolio, I am now finding interesting large-cap non-Canadian ideas."

Patient Capital Q4 letter
03/06/10 Value Investing Funds
"In essence do valuations reflect the risk of the current environment and do they provide an acceptable rate of return given those risks? In our estimation, current aggregate equity prices have run far ahead of economic fundamentals."

Betting on the blind side
03/02/10 Value Investing Funds
"Michael Burry always saw the world differently - due, he believed, to the childhood loss of one eye. So when the 32-year-old investor spotted the huge bubble in the subprime-mortgage bond market, in 2004, then created a way to bet against it, he wasn't surprised that no one understood what he was doing. In an excerpt from his new book, The Big Short, the author charts Burry's oddball maneuvers, his almost comical dealings with Goldman Sachs and other banks as the market collapsed, and the true reason for his visionary obsession."

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."

Will fees stop bugging investors?
12/20/09 Zweig Funds
"Don Phillips, managing director at Morningstar Inc., the fund researcher, argues that 12b-1 fees "are a farce, because they don't capture all the distribution costs." Some fund managers pay for marketing out of their management fees, for example. Mr. Phillips suggests that funds should overhaul their financial statements by sorting all expenses into three main buckets: "investment management," or what it costs to research and run the portfolio; "sales and marketing," or what it costs to distribute the fund; and "operations," or overhead like accounting and legal expenses."

A career spent finding value
12/16/09 Zweig Value Investing Tweedy Funds
"'He was something of a collector,' said analyst A. Michael Lipper of Lipper Advisory Services. 'It took a lot of disappointment for him to get rid of an underperforming stock. Could somebody else have produced better results by getting rid of the losers? One might think so, but it wasn't [Tweedy, Browne's] style.'"

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."

Market-timing losses in dispute
12/11/09 Government Hallett Funds
"Despite mutual fund companies' insistence that the scandal over illegal market-timing that erupted five years ago is an old and dead issue, there's never been a full industry-wide accounting of all investor losses."

Rodriguez flouts 'small mind' investor rules
12/04/09 Value Investing Funds
"Robert Rodriguez ignores most rules of the mutual-fund industry, an approach that's helped him beat all rival managers over the past 25 years."

Free for a fee
11/02/09 Academia Indexing Funds
"I present and test a rational expectations model consistent with the finding that active funds underperform index funds by an amount roughly equal to their fees. Investors receive privately observed wealth shocks that cause them to rebalance. These shocks also induce noise in stock prices through a wealth effect. As a result, investors tend to buy in and out of index funds at the wrong time, failing to attain the buy-and-hold return of the index fund. Empirically, looking at individual as well as aggregate fund returns, I find that taking into account the timing of investment can account for most of the buy-and-hold advantage of index funds."

Investor timing ability
10/20/09 Indexing Academia 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 Bonds 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."

Solid investor Howson hands off reins
10/04/09 Value Investing Funds
"Rick Howson, who excelled in managing the same value-style Canadian equity fund for two full decades until stepping down this week, was never what you would call a high-profile "star" manager."

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."

Gone for a Burton
07/30/09 Indexing Funds
"Over the 20 years to end-December, 68% of all active US large cap funds underperformed the S&P 500 index (over 10 years, it was 64%). The underperformance, relative to Vanguard's S&P 500 index fund, was around 0.9% a year."

Investors are getting killed in ETFs
06/18/09 ETFs Bogle Indexing Funds
"A new analysis by Vanguard Group founder John Bogle indicates that investors are generally making poor decisions when buying and selling exchange-traded funds."

Currency hedging
06/13/09 ETFs Hallett Indexing Funds
"For the 12 months to June 4, XSP lost 35.6 per cent and the S&P 500 gave up 31.6 per cent. Over the past three years, XSP's cumulative loss of 30.8 per cent was about five percentage points worse than the index."

A superb fund rebounds
06/02/09 Value Investing Funds
"Hawkins and Cates are self-assured stock pickers, as indicated by their willingness to pile a huge percentage of Longleaf's assets into just a handful of companies. As of March 31, multimedia entertainment conglomerate Liberty Media (LMDIA) made up 14% of assets. Once-dominant computer maker Dell (DELL) accounted for 10%. Chesapeake Energy (CHK), an oil-and-gas producer, and Sun Microsystems (JAVA), which is being acquired by Oracle Corp., together made up 16%."

Reflections and outrage
06/02/09 Value Investing Funds
"I believe superior long-term performance is a function of a manager's willingness to accept periods of short-term underperformance. This requires the fortitude and willingness to allow one's business to shrink while deploying an unpopular strategy. Additionally, in the low return changing world I foresee, a well diversified mutual fund of U.S. stocks will likely have a harder time outperforming the stock averages and index funds, as a result of its higher expense ratio. A more focused strategy will be necessary to excel. If active managers continue to adhere to their old practices, we should see a contraction in the active mutual fund management universe over the next five to ten years."

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."

Due for a comeback
06/01/09 Buffett Dreman Miller Value Investing Dorfman Funds
"Some of the nation's best and most famous investors -- Warren Buffett, David Dreman, Ken Heebner and William Miller -- had hideous years in the bear market of 2008. I refuse to believe, though, that people with a long track record of investment prowess have suddenly become stock-market eunuchs."

Shorting leveraged ETFs
05/25/09 ETFs Indexing Funds
""Rebalancing on a daily basis is beneficial if a market trends. You're going to end up with returns greater than two times, you're going to get a compound effect. You'll see returns going up and compounding daily," Atkinson says. "There have been periods where we've seen four to six times the index return over a one year period because the market was generally in one direction. We're giving you two times the leverage, but you never lose two times the exposure. We're reducing the exposure as the market moves against you.""

Termination of investment management firms
05/18/09 Academia Funds
"We examine the selection and termination of investment management firms by 3,400 plan sponsors between 1994 and 2003. Plan sponsors hire investment managers after large positive excess returns but this return-chasing behavior does not deliver positive excess returns thereafter. Investment managers are terminated for a variety of reasons, including but not limited to underperformance. Excess returns after terminations are typically indistinguishable from zero but in some cases positive. In a sample of round-trip firing and hiring decisions, we find that if plan sponsors had stayed with fired investment managers, their excess returns would be no different from those delivered by newly hired managers. We uncover significant variation in pre- and post-hiring and firing returns that is related to plan sponsor characteristics."

Unintended consequences
04/13/09 Government Taxes Funds
"The recent Ontario budget contains a massive tax grab that our Investment Partners should be aware of. The McGuinty government is proposing the harmonization of Ontario.s provincial sales tax with the federal GST. The decision to jam an additional 8% tax on the management expense ratios (MER) of your investment products is shockingly unwise and dangerous."

The manager who gave back his fees
04/02/09 Value Investing 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."

Chou 2008 letter
04/02/09 Value Investing Funds
"The examples show that the pricing of risk has changed 180 degrees from a couple of years ago. One can argue that corporate bonds, both investment grade and non-investment grade, are mispriced more than equities. In addition, if corporate bonds are cheap, the treasuries are in bubble territory. In our opinion, this is the worst time to hold cash and short-term treasuries unless you believe we are headed into a 1930's style depression. If you believe that you should redeem all of your Fund units."

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."

Q3 2008 Oakmark commentary
10/18/08 Value Investing Funds
"In fact, we believe the decline in the market has created a very attractive environment for investing new capital. For most people, the right question to ask after a big decline is: 'Should I be investing more?'"

Concentrated value investing
10/18/08 Value Investing Funds
"Mohnish Pabrai, the Managing Partner of the Pabrai Investment Funds, has outperformed market indices over the last nine years by consistently believing in concentrated value investing. Pabrai likes to hold fewer stocks positioned in industries that he understands well, paying attention to two key variables: the intrinsic value of a business and its current price."

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 Markets 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 Markets 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."

Timing errors affect performance
08/21/08 Brokers Hallett Funds
"treat your investments like a bar of soap; the more you touch them, the smaller they get. This saying is so true. In practice, I've rarely found any need to make many changes more often than every two years. Advisors who can't resist the itch to rejig client portfolios should at least keep a running score of how their 'new' advice fares against the 'old,' unchanged portfolio in subsequent years. If the changes detract from performance more often than not, this should be kept in mind the next time the itch to switch returns."

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."

Value stock losers Buffett, Miller poised as winners
08/11/08 Buffett Montier Miller Value Investing Funds
"The five prior times since 1952 that growth beat value two years in a row, the latter group recovered and won by 17 percentage points annually on average for seven years, the data from Societe Generale show. Cheap stocks are becoming more attractive because of tumbling commodity shares, which had led the five-year bull market that ended in October, according to Societe Generale's James Montier"

Robert Tattersall
08/09/08 Value Investing Funds
"If you can tolerate double-digit losses like the ones we've seen recently, veteran fund manager Robert Tattersall suggests picking up a classic book on value investing and then just sitting tight. "

Value funds may be poised for comeback
08/09/08 Chou Value Investing Funds
"There's an old chestnut about value investors that says they're never wrong, they're just early. Unfortunately for the professional ones, when you run a mutual fund that gets marked to market every day though, it doesn't really matter. If you're early, you're wrong, and if you're wrong, you get redeemed as investors chase performance like a dog chases a rolling Frisbee."

The plight of the value investor
08/09/08 Value Investing Miller Funds
"This is a tough time to be a value investor. The value philosophy tries to outsmart the stock market by investing in companies that are deemed undervalued, often trading at a low multiple relative to earnings. It was developed by Benjamin Graham and championed by Berkshire Hathaway's (BRK.A) Warren Buffett"

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."

The prescient are few
07/13/08 Indexing Funds
"The researchers found a marked decline over the last two decades in the number of fund managers able to pass the False Discovery Rate test. If they had focused only on managers running funds in 1990 and their records through that year, for example, the researchers would have concluded that 14.4 percent of managers had genuine stock-picking ability. But when analyzing their entire fund sample, with records through 2006, this proportion was just 0.6 percent - statistically indistinguishable from zero, according to the researchers."

Your post-subprime portfolio
07/10/08 Indexing Retirement Funds
"Saving for retirement has never been easy, but the past year has made a complicated task all but overwhelming. The ongoing collapse of the credit markets, sparked initially by problems in subprime mortgages, has challenged some of investors' most cherished and reliable investment beliefs and strategies. Auction-rate securities sold as "cash equivalents" ended up sticking investors with huge losses, supposedly low-risk bond funds blew up, and for those who thought they'd pay for retirement by selling the house.well, need we say more?"

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."

Bear market freak out
07/06/08 Markets Funds
"When it comes to investing, human nature is not our friend, and will consistently lead us to do the wrong thing at the wrong time. The chart to the right shows how investor funds have flowed into stock mutual funds so far this decade. Notice how we poured money into the stock market after the great years and panicked and sold after declines. A clear pattern of buying high and selling low, something I'm pretty sure investors didn't consciously set out to do."

Mutual fund flows and investor returns
07/06/08 Academia 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."

Mohnish Pabrai interview
06/25/08 Buffett Pabrai Funds
Mohnish talks markets, Buffett, and stocks. He is keen on American Express and Berkshire Hathaway.

Active Fund Performance At A Passive Price
06/25/08 Stingy Investing Funds
"Frugal investors are often attracted to index and exchange traded funds because they offer a simple way to buy a diversified stock portfolio at a low cost. But there are other options for thrifty individuals who want to take a more active approach. I explored the money-saving possibilities of buying stocks held by index funds instead of the index funds themselves in the May 2008 edition of the Canadian MoneySaver. This month, I'll investigate a similar method for active funds where the potential savings can be much higher."

Portfolio dilution excessive in Canada
06/24/08 Hallett Funds
"Drilling down more deeply reveals that the worst dilution occurs in our own tiny stock market. Look at virtually any wrap program and find out where most of the funds or managers are focused. I'll bet it's on Canadian stocks."

Rising from the stock market rubble
06/21/08 Value Investing Funds
"The lock that commodities have on the Canadian market has made mutual funds with a value strategy a singularly awful investment in the past few years. But the Celestica story is a reminder that well-chosen value stocks do offer potentially fantastic rebound potential. What beaten-down Canadian stocks might be ready to pop? Let's nose around the portfolios of some of the country's top value fund managers and see what they're holding."

Third Avenue Q2 2008 letter
06/17/08 Value Investing Whitman Funds
"One of the important lessons from the Bear Stearns debacle for TAVF is to avoid owning common stocks where the businesses need to have relatively continuous access to capital markets in order to survive as going concerns."

Credit crunch prepares feast for value hunters
06/15/08 Value Investing Funds
"Value investors look at measures such as price-to-earnings and price-to-book ratios to find stocks that are trading at bargain prices. A key premise of value investing is that markets often overreact to negative news, pushing stocks below their true worth. The idea is to buy the stocks when nobody else wants them, so you can profit when the market comes back to its senses. Sound simple? It isn't. Buying stocks others are ditching requires a strong contrarian streak and loads of patience while you wait for the price to recover. Sometimes it takes years; sometimes it never happens."

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.""

Chou runs his fund the way he runs his life
05/31/08 Bonds Value Investing Chou Funds
"At lunch Francis lamented that "I've become a bond trader." He finds it is very time-consuming because "there is a lot of haggling that goes on." His days are now filled with calls from bond dealers who know that Francis is an interested buyer. He is on everyone's speed dial. In the 2002 Chou Fund report, Francis said "distressed securities involve companies that have one or more serious deficiencies including weak economics, stretched balance sheets, liquidity problems, incompetent management, accounting frauds, potentially mutant cockroaches - you name it.""

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."

Is value dead?
05/22/08 Value Investing Hallett Chou Funds
"The cookie-cutter office building stacked amid high-rise condos and streetside retail is not where you'd expect to find the man who oversees $1.2 billion in funds, and who is said to be Canada's top stock-market bargain hunter. Taped to his door is a plain piece of paper that has been run through a printer: "Chou Associates Management Inc.," it reads, implying that nothing of much importance is happening here. The door is locked, but jiggle the handle of the door and out pops Francis Chou, whom I have come to ask about the strange decline in the once-dominant school of value investing. It's an investing style once described by the late, great value guru Benjamin Graham as the equivalent of rifling through a store's discount bin. In other words, if you are patient enough to search endlessly and smart enough to know the difference between a true bargain and a bad knockoff, then you can make terrific money."

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."

Value investing is supposed to get ugly
04/09/08 Value Investing Hallett Funds
"One of the tenets of value investing is there will be times when it's going to get ugly. Problem is, for a lot of established value firms, things have never looked uglier - leading some advisors to question the wisdom of the strategy. But fund analysts say there is merit to what value firms are doing right now and investors should wait before they write off their value holdings."

Number twisting continues with fees
04/08/08 Indexing Hallett Funds
"It was almost two years ago when a draft research paper - Mutual Fund Fees Around the World - made waves by proclaiming that 'total shareholder costs' for mutual funds sold in Canada were the highest among the 18 developed countries studied. Industry critics and investor advocates ran with the paper's figures, without scrutiny, to pad their case that the fund industry regularly sticks it to investors."

How fund manager didn't lose a bundle
04/03/08 Markets Value Investing Funds
"As for where Mr. Rodriguez is betting now? He's still bearish. He's on a "buyer's strike." But he is considering his next moves. He views the recent partial bailout of Bear Stearns as "a short term positive but a long term negative . for the dollar and for inflation." The reason? Once again those who behaved irresponsibly or worse are sticking everyone else with the tab. "This has expedited the socialization of risk and moral hazard, exponentially," he says. Stay tuned."

Chou's annual report for 2007
03/17/08 Value Investing Chou Funds
"We are long term investors and, in general, our bias has been to concentrate on stock selections and not worry about currency fluctuations. With years like 2007, the question arises as to whether there have been major disparities in annualized returns over the long term between a hedged portfolio and an unhedged portfolio; in other words, does one offer more advantageous performance results during currency fluctuations? Two studies, one covering the period from 1975 through 1988 and the other from 1988 through 2003, confirm that with respect to the long term there have been no material differences in returns."

How value investor Chou wins with bonds
03/15/08 Value Investing Chou Funds
"When you read about investment stars, portfolio managers who score high double digit and even triple digit annual gains, managers of bond portfolios usually aren't there. The reason - bonds are a different game, one where risk is less courted than avoided. But when the dust settles after big market busts, it's often the bond managers who are still standing. Francis Chou, 52, of Chou Associates Management Inc., is one of those survivors. His $90-million Chou Bond Fund (US$), established in the fall of 2005, soared to the No. 1 spot among 65 funds in the high yield sector with an average annual compound gain of 10.4 per cent for the two years ended Feb. 29, 2008, far above the 1.5 per cent average annual compound gain of peers in the period."

Just think, the fees you could charge Buffett
03/12/08 Indexing Buffett Funds
"The news that Warren Buffett is now the world's richest man led to the predictable round of stories about his frugal habits - the cherry Coke, the well-done steaks and the bungalow in Omaha that has been home for 50 years. There is a point here. Like Bill Gates, whom he has toppled from the top spot, Mr Buffett is primarily interested in the business rather than the wealth that results. Money is a means of keeping score rather than an objective in its own right: the fun, Mr Buffett has said, is watching it grow."

Hedge Funds reel from margin calls on treasuries
03/10/08 Markets Funds
"The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States."

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."

Third Avenue Funds Q1
03/05/08 Value Investing Whitman Funds
"Obviously, I feel good about TAVF's investment in MBIA. The Fund ought to do well under almost any scenario. By any objective standard, the MBIA investments are attractive ones with the insurance subsidiaries deserving of an AAA-Stable rating. Yet, there exists a sense of discomfort due to the dangers of Rating Agency subjective considerations and capricious regulators."

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."

Bill Miller Q4 2007
02/13/08 Miller Funds
"I believe equity valuations in general are attractive now, and I believe they are compelling in those areas of the market that have performed poorly over the past few years. Traders and those with short attention spans may still be fearful, but long-term investors should be well rewarded by taking advantage of the opportunities in today's stock market."

Third Avenue Q4 2007
12/29/07 Value Investing Whitman Funds
"The mortgage meltdown-housing collapse seems nothing new for the U.S. economy. During the last 60 years, virtually every sector of the American economy has gone through depressions as bad as anything that occurred in the 1930s. Remember the melt-downs during the past 40 years for, inter alia energy, banks, real estate, savings & loans, Wall Street brokerages, row crops, steel, automobiles, machine tools, etc. Unlike the 1930s, all these depressions occurred without domino effect. The probability seems to be that the next ten years in the U.S. will be more like the last 40 than they will be like the 1930s. Put otherwise, the odds favor overcoming the current crisis in residential housing and residential housing finance without underlying damage to the U.S. economy."

Marty Whitman's big bets
12/21/07 Value Investing Whitman Funds
Whitman interview on CNBC. RDN, MTG, MBI, and ABK. Now that's distressed investing!

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."

Bill Miller Q3 2007
12/18/07 Miller Funds
"Where will the new leadership come from? The same place it usually does: the old laggards. I think the new leadership will be US, large-cap, dollar-based, and grow to encompass what no one wants to own today, especially financials and consumer. I also think so-called growth stocks will continue to do fine. When growth becomes scarcer and the discount rate becomes lower, growth becomes more valuable. More particularly, just as the right thing to do in 2002 was to buy what everyone was panicked about, I think the greatest gains over the next 5 years will be made in those securities people are panicked about today. For specific names, consult the 52-week new low list."

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."

2007 Chou Lecture
11/18/07 Value Investing Chou Funds
"Mr. Chou has operated two of the country's most successful funds, Chou Associates Fund and Chou RRSP fund, for the last 18 years."

3 bargain stocks
10/23/07 Value Investing Whitman Funds
""Safe and cheap" makes for a comforting mantra. Rather than timidity, though, Whitman's approach actually calls for remarkable fortitude. It requires the nerve to pick through distressed companies that others are ignoring and demands the conviction to see big gains come to fruition."

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."

2007 Whitman Lecture
06/30/07 Value Investing Whitman Funds
"Mr. Whitman has agreed to talk about three issues (1) What is Safe & Cheap Investing (2) Advantages of Safe & Cheap Investing, and (3) Problems with Safe & Cheap Investing."

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."

Bill Miller's letter
01/25/07 Miller Funds
"Concentration works when the market has what the academics call fat tails, or in more common parlance, big opportunities. If I am considering buying three $10 stocks, two of which I think are worth $15, and the third worth $50, then I will buy the one worth $50, since my expected return would be diminished by splitting the money among the three. But if I think all are worth $15, then I should buy all three, since my risk is then lowered by spreading it around. For much of the past 25 years, there were those $10 stocks worth $50 around. For the past few years, they have been largely absent, as inter-industry valuations have only been this homogeneous about 2% of the time."

Whitman profile
12/11/06 Value Investing Whitman Funds
""We're such cowards!" said Martin Whitman, the 82-year-old legendary superinvestor, at a seminar organized by New York Society of Security Analysts on February 16, 2006, "We only want to be the senior-most creditors in distressed situations. We only want to be the adequately secured lenders in Europe and overseas. We don't want to be subordinate to any of the asbestos or tobacco liabilities..." And he brilliantly calls himself the "safe and cheap" investor."

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."

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