It has now been over two years since I penned this email to the last mutual fund company left in my portfolio; as people understandably worry about this RRSP season (in Canada), searching for the best place to park their money, it seemed timely to put it out “in the wild”.
Take heart, there is life after decades of sub-par performances and the warmth of sunshine up our collective skirts:
Subject: you're fired To whom it may concern (and it should concern all at <unnamed Mutual Fund Co.>); All too frequently customers vote with their feet without taking time to provide valuable feedback. It is my intention to provide you with, at the very least, a sense of the dismay I feel watching the funds entrusted to you for my childrens' education evaporate. 17 years ago I was a fledgling investor. I did all that I could to educate myself prior to the wealth of information available via the internet. I read and re-read the Wealthy Barber; I subscribed to various publications and read numerous books on the Canadian mutual fund landscape. I watched John Templeton speak when I could. And I invested in your <unnamed Growth Fund>. I understood Dollar Cost Averaging, and dutifully averaged my way down for the next six years. All the while reading your annual reports describing the various market malaises that were keeping my expected returns down. You were the pros, and your excuses made sense. 17 years have passed since I made the decision to trust in your skills. In that period of time, interest rates paid remained between 3 and 5% (for 5 year GICSs), my money market funds averaged 3.8%, inflation rates have stayed in a 2 to 3% range, and my <unnamed Growth Fund> has returned 1.47%. Seen in any light, long term performance such as yours can only be described as anaemic; viewed against a backdrop of interest rates that exceeded your returns, and an inflation rate that you have not been able to surpass, your performance is abysmal. I am ashamed to have allowed you to mismanage your mandate so poorly for so long and I can only imagine the shame that your founder might feel if this letter were to cross his desk; that said, I am relieving you of your mandate. You are fired. Yours truly -
To their credit, or perhaps because I cc’d two financial journalists from the National Post and the Globe and Mail, my missive made it past the customer service desk to the VP of Client Services. His response:
Dear Mr. Maass Thank you for your e-mail. I’m sorry to hear you were disappointed with the results of your investment and chose to redeem your holdings of <unnamed Growth Fund>. Few investors take the time to share the reasons behind their redemptions, and I can assure you we value your feedback, and greatly appreciate that you chose us 17 years ago to help you save for your children’s education. A challenging decade for international equity investors While <unnamed Growth Fund> has been significantly impacted by the enduring volatility in international equity markets, the fund beat its benchmark, the MSCI World Growth Index, seven times in the last 10 years according to Morningstar, and is on pace to beat it again this year. The unfortunate fact is this period has not been friendly to international equity investors. The last decade opened with the imploding Japanese yen and closed with the market crash of 2008. This summer has presented its own challenges, with wide-spread concerns about U.S. and European debt sparking renewed volatility. In spite of this, the category as a whole is on its way back. As of July 31, the fund and its benchmark posted 1-year returns of more than 10%. I recognize our long-term projections will provide little comfort, but we continue to feel optimistic about <unnamed Growth Fund’s> prospects. This summer’s U.S. and European debt concerns have portfolio manager LM seeing significant value in many of the fund’s large-cap companies. In Gary Lamphier’s July 21 article in the Edmonton Journal, LM discussed the opportunities she’s finding amid the market turmoil: “‘A lot of what we own today are companies that may be domiciled in the U.S. or Europe, but they're really global companies,’ says LM…’And if we take apart the U.S. market and look at where equity valuations are today, what we find is the market is basically trading at 13 or 13.5 times next year's earnings. And many large-cap, global companies are trading at significant discounts to that,’ she adds.‘In fact they're trading at valuations that are very compelling based on their regional exposure, their global exposure and their ability to generate strong earnings growth over the next few years.’” A fund for every investor With four distinct families, offering funds and portfolios in categories ranging from fixed income to global equities, I am confident we have solutions to suit every investor’s unique investment objectives, time-horizon and tolerance for risk.
I was of course dutifully and politely thankful of their response, and I won’t bore you with my follow-up here, but the fact of the matter is, that while their high-powered professional advisors and money managers struggled with horrendous market pressures that reduced my take to 1.47%, their take (the Management Expense Ratio, or MER) continued to be upward of 2%, during a time when I (not high-powered, stoopid me) was earning ~12% CAGR on my own.
Go on; get out from under! (Or, to quote the ING commercials from years ago: “Save your money”)