I have railed against mutual funds so many times that you would find it surprising (perhaps hypocritical) to find that a mutual fund is one of the top ten holdings in our combined portfolios. The mutual fund I hold is Leith Wheeler Canadian Equity Fund and I have some very good reasons for breaking the cardinal rule of avoiding mutual funds:
- I hold the fund in the Group RRSP offered by my employer. The rules allow us to only invest in one or more of the eighty odd funds offered by the plan. I am allowed to contribute a certain percentage of my salary, 50% of which is matched by my employer and I am not allowed to withdraw these funds from the account.
- The plan does offer some index funds but the fee differential between the index fund and the actively managed fund is only 15 basis points. In other words, the fees for the index funds are fairly high.
- Leith Wheeler has an outstanding long-term record with a 10-year record of 15.2% compared to 10.2% for the TSX Composite Index. While this only reflects past performance, I am very comfortable with Leith Wheeler’s value style and contrarian bent that I am confident I will stick with the fund even through a rough patch.
- The fund is fairly small at just under $500 million. This is an important consideration as I feel that it is difficult to outperform the index the larger a fund gets. In contrast, Canada’s largest mutual fund has total assets of more than $12 billion.
I realize that I might still be wrong and Leith Wheeler might turn out to be a dog of a mutual fund, but the damage will be limited as it is only 5% of our total holdings.
