Generally I don’t like to write anything bad about a fund. I will try to keep to that, but it may be difficult to do.
So far this year, it has lost nearly 27%. But digging deeper, it is not that difficult to see why. This fund is a bit of a special situation in that it invests in small and mid-cap mining stocks that are rolled into upon expiry of Marquest flow through funds.
Flow through shares are a uniquely Canadian investment. They are a special type of common share that is issued by Canadian oil and gas or mineral exploration companies. These shares allow you to claim various federal and provincial tax credits and deductions for the exploration costs the companies incur. This will often allow you to write off the entire amount of your investment in the shares against your taxable. It is for this reason that these investments are popular, making them a tax product first, and an investment second.
Another reason that performance has lagged is many of the companies are very small exploration companies. They have limited market caps, and are of little interest to most investors, putting a lot of selling pressure on them once they are transferred out of the flow through fund and into the rollover fund. The result is often very dismal performance.
While the first half loss of 27% is bad, it is not out of character for this fund. If you had invested $10,000 in it five years ago, today, it would be worth a little more than $1,000. Granted, most people will be in this fund because their flow through shares have been rolled into it. Once the tax benefit is taken into account, the net loss may not be as dramatic.
Regardless, I believe there are better investment options available, and anyone who is not being rolled into it from a flow through investment should avoid it.