Balanced Fund vs. Tax Effective Balanced Fund
The Tax Effective Fund tries to minimize distributions to unit holders in order to defer tax liabilities, allowing the investment to grow with less of a tax drag. This is achieved by holding the underlying securities individually (instead of holding funds as in the case of the Mawer Balanced Fund) and offsetting capital gains with capital losses. It is important to note that the Tax Effective Balanced Fund’s performance and activity will ultimately dictate the overall effectiveness of the strategy. The long term impact of the tax strategy is our key focus, while year over year distributions may vary.
Volatility for both funds is generally average, so both are recommended for investors who have a medium to long-term time horizon.
Bottom Line: We recommend that investors hold the Mawer Balanced Fund in tax sheltered accounts (RRSPs, retirement income funds, locked in retirement plans, pensions, tax free savings accounts etc.) and hold the Tax Effective Balanced Fund in non-registered, fully taxable accounts.*
Mawer Balanced Fund
Greg Peterson, CFA
Investors in the Mawer Balanced Fund only pay ONE Management Expense Ratio (MER) listed below. They do NOT pay the MERs for each of the underlying funds.
MER: 0.94% (as at Dec. 31, 2016)
Invests in Canadian, U.S., and International equity securities, as well as bonds and debentures of Canadian government and corporate issues primarily through funds managed by Mawer.
Essentially it’s a fund of funds that includes managed allocations to the following:
- Mawer Money Market Fund
- Mawer New Canada Fund
- Mawer Global Bond Fund
- Mawer U.S. Equity Fund
- Mawer Canadian Bond Fund
- Mawer International Equity Fund
- Mawer Canadian Equity Fund
- Mawer Global Small Cap Fund
The Fund’s objective is to balance incoming growth in order to achieve attractive long-term returns with a measure of stability for non-taxable investors.
The Mawer Balanced Fund pays out interest income monthly, so long as the distribution amount is higher than the MER expense. Dividend income is paid out annually, when the underlying equity funds distribute their income. Capital Gains distributions also occur annually in December.
Mawer Tax Effective Balanced Fund
Craig Senyk, CFA
MER: 0.92% (as at Dec. 31, 2016)
Invests up to all of its assets in equity and equity-related securities, treasury bills, short-term notes, debentures and bonds from Canadian, U.S. and international issuers or in other funds managed by Mawer. They can be of any size and from any industry. The objective is to provide attractive long-term returns on both a pre-tax and after tax basis with a measure of stability.
The Mawer Tax Effective Balanced Fund pays out interest and dividend income monthly, so long as the distribution amount is higher than the MER expense. Capital gains distributions occur annually in December.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the fund facts and the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mawer Funds are managed by Mawer Investment Management Ltd.
Additionally for money market funds, the performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you.