RSP funds set to fade into history

(June 29, 2005) With the federal budget finally receiving royal assent on Wednesday, more mutual fund companies are moving to eliminate RSP funds. The budget contained measures to abolish the foreign property rule.

“I would like to extend my congratulations and thanks to all the parliamentarians who supported this legislation for helping to improve the lives of Canadians in very real terms,” Finance Minister Ralph Goodale said in a statement.

“Despite the difficulties posed by the current minority situation in the House of Commons, we are moving forward on the highest priorities of Canadians in areas like child care, community infrastructure, post-secondary education and the environment, while also providing tax reductions and laying the groundwork for a more productive economy.”

AIM Trimark announced today it would begin winding up its 18 RSP or clone funds in response to the elimination of the FPR.

“Investors can now take advantage of global investment opportunities without the cost differential of forward contracts that existed between RSP-eligible clone funds and their corresponding underlying fund,” the company said in a statement.

“The opportunity to invest anywhere in the world, free from foreign content restrictions and at a reduced cost is great news for investors,” says Patrick Farmer, AIM Trimark’s chief investment officer.

AIM Trimark says it will first terminate forward contract used by RSP funds, and the proceeds will be redirected to purchase units of the underlying funds. The company expects all its RSP funds to be closed by August 12.

“We owe it to investors to have a strategy in place that puts their interests first by eliminating extra costs as quickly as possible,” says AIM Trimark’s president and chief executive officer, Phil Taylor. “No action will be required by investors and their advisors; we will take care of all the details to make the process easy and seamless.”

Clarington Funds also announced today it intends to terminate its four RSP funds, effective August 19.

“The changes to the foreign content rules open up new options for Canadian investors,” says Clarington executive vice-president Sal Tino. “Clarington is moving quickly to terminate the forward contracts and the RSP funds to ensure that investors in these funds do not bear unnecessary costs. We encourage investors to talk to their financial advisors to evaluate the impact of these changes on their investment portfolio.”

Earlier this week, the Canadian Securities Administrators granted mutual fund companies an exemption from the requirement that investors be provided 60 days notice before a fund is terminated, allowing the quick demise of clones.

Several firms have already taken advantage of the exemption, including Mackenzie, Fidelity and Investors Group.

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