One of the reasons we are not fans of actively-managed mutual funds is their high cost (the other reason to avoid most mutual funds is their high turnover). It is very hard for even talented managers to overcome expenses north of 2.5 per cent year after year, especially in today’s environment of modest expected returns. Jarislowsky Fraser, a highly regarded money manager, which until recently offered funds for high net worth individuals and pension funds has launched three mutual funds that are noteworthy for their low fees.
The JF mutual fund line-up is a model of simplicity in that it offers just three funds: an Income Fund, a Balanced Fund and Equity Fund. The funds are offered in two flavours — DIY investors can purchase E-Series funds at a discount broker (Disnat, National Bank Direct, Scotia iTrade and TD Waterhouse) and A-Series for investors purchasing through an advisor. The E-series funds require a minimum investment of $10,000 but have a MER of just 0.65 per cent for the Income Fund and 0.75 per cent for the Equity fund. The A-Series funds charge a higher MER to compensate the financial advisor.
In a recent newsletter, JF provided insight into its current thinking regarding its portfolio. The money manager says that it taking advantage of the strong Canadian dollar by investing in large cap, non-cyclical growth stocks that offer steady dividend growth, strong balance sheets and low valuations. It is also underweighting deep cyclicals because it is expecting supply response to drive commodity prices lower.