Unlike Mackenzie, which opted for a strategy of attacking the enemy, Invesco Trimark is adopting a strategy that can only be described as “if you can’t beat them, join them”. As Jon Chevreau reported yesterday, Invesco Trimark has launched mutual funds that hold US-listed PowerShares ETFs and pay a trailer fee, which would make it attractive for the advisor channel.
It is hard to get excited about these new-fangled mutual funds because rather than providing investors with a genuinely better product, Invesco Trimark’s approach smacks of a fund company trying to cash in on a hot trend. The first thing you notice about these funds is that five of the six new funds track narrow, niche sectors such as Agriculture, Water, Precious metals, Clean Energy and China –hardly the first, or for that matter, last, choice of index investors.
The funds are also pricey — the cheapest fund sports a fee* of 1.65% and all the funds are front-end loaded. The new fund line up has just one fund that can be called broad market: the PowerShares FTSE RAFI Emerging Markets. It has a fee, excluding operating expenses and taxes of 1.90%. In comparison, a financial advisor licensed to sell stocks and charging a 1% fee would be able to capture emerging market exposure for less than 1.5% including MERs and trading commissions.
Investors should keep in mind that the ideal ETFs track broad-market indices efficiently at a very low cost. All other ETFs or mutual funds holding them should be approached with caution.
PS: Rob Carrick says these mutual funds are taking ETFs to the masses.
PPS: Michael James isn’t impressed with the new funds: “they walk and talk like mutual funds, but advisors can call them ETFs”.