Mackenzie announces a dramtic overhaul of their fund lineup

Posted by on Apr 24, 2013 in Paterson Other | 0 comments

Yesterday, the fine folks at Mackenzie announced their plans for a major overhaul of their product shelf. According to the press release (http://www.newswire.ca/en/story/1150831/mackenzie-investments-simplifies-and-strengthens-product-lineup), they are simplifying and strengthening their product lineup. I’ll give them simplifying, but I’m not totally sold on the strengthening.

You will get no argument from me that Mackenzie’s product lineup is rather cumbersome. There are a lot of brands; Ivy, Cundill, Universal, Saxon, Sentinel, Symmetry, and Mackenzie. Fortunately, one of the things that this proposal does is eliminate much of that. Gone are the Saxon, Universal and Symmetry names, with Mackenzie, Cundill, Ivy and Symmetry remaining.

Going forward, there will be greater clarity as to what each brand represents. For example, Cundill will be nothing but deep value, Ivy will continue to focus on quality, and Symmetry will remain managed portfolios. They are also making the fund names more representative of how the fund actually invests, with references to not only asset class, but also geography and style. For example, the Mackenzie Founders Fund will be renamed the Mackenzie Diversified Equity Fundand the Saxon Stock Fund will be renamed the Mackenzie Canadian All Cap Value Fund. This makes perfect sense and should help to make things much easier for advisors when looking at the fund options.

There are way too many funds on the Mackenzie shelf. They offer 12 fixed income funds, 13 balanced funds, 19 Canadian equity funds, six U.S equity, 22 global equity funds, eight sector offerings and a seven fund offering of managed portfolios. Let’s be honest, that is way too much and there is definitely room to cut. And cut they will. After the changes, it is expected that 28 funds will be merged into existing offerings, dramatically reducing the number of funds on the shelf, without negatively affecting the breadth of offerings. 

With these proposed mergers, many of their better known, higher quality core funds will be left alone. For example, Cundill Value, and Ivy Foreign Equity remain untouched. Most of the funds that are being folded into others are smaller, lesser quality funds with relatively small levels of assets and less than stellar investment returns.

They will be reducing the number of sector funds, cutting their more focused offerings from eight to four. For their precious metals funds, this makes perfect sense, since the overlap between the two current precious metals funds is extremely high. We are somewhat saddened to see the Real Estate and Healthcare offerings merged into the more broadly focused global equity funds. Truth be told, while this is sad, there are better funds available from other providers, so the loss is not significant in the big picture.

Within the balanced funds, the fixed income team will now be responsible for managing the bond sleeve, rather than the current managers. Why this hasn’t always been the case is mind boggling to me, and I do applaud them for this change. This should become beneficial to investors once interest rates begin to rise. It will be a positive to have dedicated fixed income specialists running bonds, rather than an equity specialist.

In addition, they will be launching two new funds; the Mackenzie Strategic Bond Fund that will invest in a mix of government and corporate bonds, and the Mackenzie Floating Rate Income Fund, which will invest in floating rate notes. While these funds may fill a hole in Mackenzie’s lineup, we’re not particularly excited about either at the moment. They are expected to be available in early May.

For most non registered investors who may be affected by these changes, there aren’t expected to be any immediate tax events. The one exception would be in a case where a corporate class fund is being merged into a trust fund. In these cases, the merger will trigger a taxable event for the investor. In all other cases, there is not expected to be anything to worry about until they sell out of their fund holdings at which time they will have to declare their capital gain or loss.

These changes are expected to take place over the next several months.

Bottom Line: We really like this plan. A year and a half from now once all the dust has settled, we believe the result will be a more streamlined, focused fund family that still offers investors a wide range of investment choices. It should be much easier to understand and simpler to identify the investment objective and strategy of a fund.

However, getting there may be a bit of a challenge, as there will no doubt be much confusion for investors and advisors alike while this transition takes place. To their credit, Mackenzie has created a website that lays out the details and the timelines for many of the changes, which should help to ease the transition. You can access this website at mackenzieinvestments.com/now.

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