Everyone benefits from labour funds except investors

Jonathan Chevreau cited a York study in his Dec. 14 National Post column on the poor performance of labour-sponsored investment funds. Tax credits are the main reason Canadians buy labour funds in the first place. Most put up $5,000 per year to net $1,500 in tax credits. Unfortunately, the tax credits are soon cancelled out by high management expense ratios (MERs). Labour fund MERs average 4.6 per cent – twice that of mutual funds, according to finance professors Yisong Tian of York’s Schulich School of Business and Scott Anderson of Ryerson University. These professors won an award last year with their paper, “Incentive Fees, Valuation and Performance of Labour Sponsored Investment Funds.” They concluded manager compensation is the main culprit behind the performance: “Several elements of the fee structure are not in line with the best interests of investors. Most LSIFs, despite the 30 per cent tax credit, are still likely to be inferior to alternative investments such as mutual funds.”

On air

  • Holly Small, dance professor with York’s Faculty of Fine Arts, talked about how the Canadian Children’s Dance Theatre has been performing Wintersong: Dances for a Sacred Season for 23 years, on TVO’s “Studio 2” Dec. 13.