If you invest in mutual funds, have you ever wondered how your funds get classified? What’s makes a fund, for example, a Canadian Balanced Fund, in the first place? That’s where the Canadian Investment Funds Standards Committee (CIFSC) comes in. As stated on their website (http://www.cifsc.org) “the primary purpose of the committee is to provide investors with a consistent set of mutual fund categories”. Over the past several years, it’s been anything but consistent and especially difficult for advisors who need to do research on the funds they advise their clients on.
Last year, Morningstar broke away from CIFSC and created its own fund categories due to frustration with the CIFSC’s methodology. As an advisor, I found it frustrating because for the same fund, CIFSC might have it in one particular category and Morningstar another. Advisors had to become “mutual fund bilingual” so-to-speak.
In March of this year, it seems Morningstar and CIFSC have patched things up and agreed to come back together. This has now set the stage for re-establishing a single set of basic industry-wide categories, and everybody’s happy again.
So what about your Canadian Balanced Fund? It might stay the same but it depends upon its equity and fixed income holdings. Otherwise it may fall under the following categories.
· Canadian Balanced – Equity Focused
· Canadian Balanced – Income Focused
· Canadian Balanced – Income Balanced.
If you go the CIFSC website, you can look at the rules and flowcharts for how all the new categories will likely unfold. Interested parties can provide feedback on the proposals up until May 11, 2007. Here is mine. “Just get it done, please. Get funds in the same categories, so whether I get my data from Morningstar, Globefund, or Fundata, it’s consistent for advisors too! You have cost me considerable time and money trying to determine which system to use. Let’s move forward.”
Disclaimer:” “Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.”
Don Maycock, P. Eng, CFP is an independent financial advisor, licensed for mutual funds and insurance. If you have a question or comment, email Don at dmaycock@a-q.com, call (613) 966 8289, or go to www.donmaycock.com for more information.
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