Should she switch Purpose funds?

Readers’ questions answered

Q – My financial advisor has me invested in a variety of Purpose funds. I do not think they are doing well, but my advisor claims they are paying me dividends. I don’t see how they are. Can you please advise if they are a good investment? – Ramona K., South Surrey, B.C.

A – Purpose Investments is a well-run company, founded by Sam Seif who is considered to be one of the top innovators in the wealth management business. The company offers a wide range of mutual fund and ETF products, and some, as you might expect, are performing better than others.

You refer to dividends, so perhaps one of the funds you own is Purpose Core Dividend Fund. It does indeed pay a nice monthly dividend of $0.0819 per unit (about $0.98 per year at the current rate for a 4.1% yield). However, the total return is well below average for its category over all time frames. The 3-year average annual compounded rate of return to the end of October was 2.7% (A units) compared with 3.8% for the category. Year to date it is down 8.5% to Oct. 31. If this is one of the funds you own, my advice is to look for something else.

A better bet if you’re interested in income might be the Purpose Multi-Asset Income Fund. It invests in seven other Purpose funds plus some of the major banks. It hasn’t been around for long, but it’s down only 1.2% in the 12 months to Oct. 31 (A units) compared to a loss of 2.2% for its Global Neutral Balanced peer group. The monthly distribution is $0.042 per unit (about $0.50 a year), to yield 5.3%. There is also an ETF version of this fund trading on the TSX under the symbol PINC, which has a lower management fee (0.85% MER compared with 1.55% for the A series mutual fund). The ETF trades at a higher price, but the distributions are double those of the mutual fund units.

Overall, I found many of the Purpose funds I looked at were recently performing below the category averages. There are many reasons for this, including the recent downdraft in both bonds and equities, which has affected performance for most funds. But don’t feel that you are committed to this organization. Do some research. Ask your advisor for alternative suggestions from other companies and check out the total returns, cash flow, and costs of those your advisor recommends.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

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Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.