Canadian Fund Giant To Slash Fees
July 4, 2005
CI Mutual Funds, Canada's third-largest fund company, plans to establish a fixed administration fee for its mutual funds that would result in lower costs and greater transparency for investors.
Under the terms of the proposal, CI will bear all the operating expenses of the funds with the exception of taxes and new governmental fees in exchange for a fixed administration fee.
As a result, all of its funds will have predictable expense ratios that will essentially be the sum of their management and administration fees, including taxes. The plan would effectively put a cap on the funds' expense ratios with CI absorbing costs that exceed the fixed fee.
"Our plan ensures that investors will know what they are paying to invest," said Peter W. Anderson, CI president and CEO, in a prepared statement.
"Currently, MERs are variable and unknown to investors until after the fact. Under our proposal, total fees can only go up if security holders expressly give their approval. This is not the case in the industry today," he said.
CI's proposed administration fees, on average, are 36% lower than the funds' actual operating expenses for 2004. The fees will be set at 0.20% for Canadian equity funds, 0.21% for U.S. equity funds, 0.22% for global equity and specialty funds, 0.17% to 0.20% for income funds, and 0.17% to 0.22% for balanced and portfolio funds, the company said.
If approved by shareholders, CI's fee cuts would take effect in the beginning of September. Other big fund shops in Canada are expected to follow suit.
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