Barclays proclaims Fee Freedom Day for fund investors

(February 6, 2003) Every year, the Fraser Institute makes headlines by calculating Tax Freedom Day, the day the average Canadian has finished paying taxes for the year. Now, Barclays Global Investors is calculating Fee Freedom Day, when the average mutual fund investor stops paying fees and starts keeping the returns generated from their investment.

This year, Fee Freedom Day is July 28, according to BGI general manager Steve Rive. “This shows just how high mutual fund costs are compared with the returns that these funds deliver,” Rive says.

To determine Fee Freedom Day, Barclays took the median management expense ratio (MER) fee for mutual funds in the Canadian equity category expressed as a percentage of pre-MER five-year returns, based on Globefund data for 2002. “We then apply that percentage to the days in the year to arrive at a specific date,” Rive explains.

Barclays is using the Fee Freedom Day campaign to promote its own family of index funds, which have substantially lower MERs that the average fund.

Mutual fund fees have been garnering more public attention recently. A Maclean’s survey last week suggested that underperforming markets led to increased fee scrutiny among some investors. The survey also found that while the average MER on Canadian equity funds rose to 2.76% in 2002 from 2.5% in 1999 while the median annual return for equity funds fell dramatically.

Both Barclays and the Ontario Securities Commission offer an online mutual fund fee calculator, which lets investors quantify the impact fees have on investments. Rive says the initial version of the Barclays calculator received more than 29,000 visits, while the new updated version has had 4,000 visits.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca