First with the news, and free to boot

In case you missed our piece yesterday at 10:39 a.m. regarding the rumoured new Blackberries (see post “GMP Research previews touchscreen Blackberry“, December 18-07), the DTM followed-up with their own story in today’s paper. If only I knew how to upload the diagrams from Ray’s research report.

Last week it was BCE, and before that there was the November 16th story mirroring our work regarding the Mackenzie Ivy fund’s performance versus government-backed bonds. The DTM’s story:

“While investors have a love affair with these big funds, many had trouble beating the index over three and five years. The few that did lick the benchmark over the longer period included two bank funds, which investors can get at their local branch.

The $3.23-billion TD Canadian Equity Fund co-managed by John Smolinski and Scott Margach turned up on top of the heap over three and five years. The $5.28-billion RBC Canadian Equity Fund run by Warner Sulz also beat the benchmark for five years.

It’s interesting to see how Gerry Coleman, who runs the $5.27-billion CI Habour Fund, and former partner Jerry Javasky, who manages the $3.59-billion Mackenzie Ivy Canadian Fund, have parted company in more ways than one.

The veteran managers have a similar value-oriented, buy-and-hold investment style. They used to run money together at the former United Financial Management Ltd., and co-managed Mackenzie Ivy Canadian before Mr. Coleman jumped ship in 1997 to join CI Investments Inc. to start the Harbour funds.

Mr. Coleman’s fund beat the index with a 19.4-per-cent return over three years, and marginally underperformed the benchmark with a 15.74-per-cent return over five years.
But Mr. Javasky’s fund, which typically holds few resource stocks and is unhedged in this version, has dramatically underperformed the index. It sits at the bottom of the heap, eking out a 5.07-per-cent return over three years, and 6.14 per cent over five years.

During these years of robust Canadian markets, Ivy Canadian investors have been paying fat fees for returns that are only slightly better than short-term Treasury bills. They would have been better off in a no-brainer index fund.”

Here is an excerpt of our September 4th post on the topic of big equity funds not beating AAA bond returns:

“As of last Thursday, a five year Canadian government bond was trading at an implied yield of 4.28%.

If you wanted a similar return over a five year period, you could have invested in the following mutual funds (data from Saturday’s Globe and Mail):

AGF International Value: 4.68%

CI Canadian Bond Fund: 3.70%

CI Value Trust Corporate Class: 2.32%

Fidelity Global – B: 6.40%

Mackenzie Ivy Canadian 5.32%

Mackenzie Ivy Foreign: 3.11%

Mackenzie Ivy Growth & Income: 5.43%

SEI U.S. Large Co. Equity 4.34%

In the case of Mackenzie’s Ivy Foreign Equity fund, for example, the management expense ratio is a whopping 2.46%, which means on the $2.73 billion under management, the team (Mackenzie and the stock brokers that placed the fund) earned more than $335 million in fees over the five year period (assuming AUM were stable). That seems like a herculean amount of effort to earn less than what the federal government would offer in annual interest for a Triple A-rated security.”

We’ll never get the daily circulation that our favourite domestic newspaper attracts, but with all of these scoops maybe we should start selling ads on our site to generate some revenue for our charitable pursuits. Thoughts?

MRM