AGF to reduce fees on clone funds

(April 12, 2005) AGF is the latest company to announce plans to lower expenses on RSP clone funds in the wake of Ottawa’s proposal to eliminate the foreign content rule.

The reduction will apply retroactively to February 23, AGF says, the day the budget was introduced and Ottawa announced it would eliminate the 30% cap on foreign investing in registered plans.

“The elimination of foreign content restrictions will provide Canadians with the ability to enjoy the benefits of a growing global economy and AGF is uniquely well-positioned to serve those needs,” said Randy Ambrosie, executive vice-president, sales and marketing, AGF Funds.

The Toronto-based fund company currently has eight clone funds, according to Morningstar Canada. The firm’s flagship International Value fund has a management expense ratio (MER) of 2.8% while its RSP clone’s MER is 2.96%. The AGF World Balanced fund has an MER of 2.49% — the RSP clone version has an MER of 3.14%.

The changes will take effect only if the amendments eliminating the foreign content rules become law.

AGF investors have the option of maintaining current foreign content limits or discontinuing the automatic rebalancing feature, allowing foreign content to exceed 30%.

“AGF will continue to monitor and rebalance all RSP portfolios unless directed by the investor or until the proposed changes officially come into effect. For investors who wish to discontinue automatic rebalancing, AGF will accrue and remit any penalties as required by the Canada Revenue Agency for portfolios that exceed the foreign content limit until the proposed changes become law.”

In a joint survey conducted with Market Probe Canada, AGF polled nearly 1,700 advisors to get their views on the foreign property rule. Sixty percent said they planned to allocate more than 30% of their clients’ RRSP portfolios to foreign content.

However, almost half of respondents said they had no plans to make the change over the next three months.

AGF says its approach addresses these scenarios by allowing investors to benefit through reduced fund expenses while giving them the freedom to choose how they will apply the pending rule changes to their portfolios. “This is a win-win proposal for our clients and we will continue to explore how AGF can best offer global diversification in our funds,” added Ambrosie.

Several fund companies, including Fidelity and Brandes, have already lowered fees on RSP funds. Others are taking a wait-and-see approach, given the Liberal’s minority situation and the possibility that a snap election could derail the budget proposals.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com