Mutual funds short-term trading: how picky are they?

[mart]

As posted in my other thread, I'm moving my Dundee account to TDW. I've got quite a few f-class funds in there that were purchased ~40 days ago (moved from regular FE to the f-class so it's a different class thus isn't considered a simple "transfer"). The prospectus mention that there "may" be a 2% short-term trading fee applied if the fund is kept less than 90 days. What are the odds of getting dinged by this? They sure aren't clear about that in their brochure (Dynamic / Mackenzie / AGF). I'd like to get rid of those but not if it means taking a 2% hit..

[londoncalling]

I would place the chances of you having to pay the 2% at guaranteed. Any chance they have to ding you with a fee that is clearly stated in their prospectus is certain to happen. That's why many investors remain trapped in high fee high MER return eating mutual fund hell.

Do you think if all the fees and MERs were clearly stated and easy to comprehend the fund companies would have as many assets and customers?

[mart]

It's actually not clearly stated.. that's the problem. Below is an example from a Dynamic fund:

The Manager will take such action as it considers appropriate to
deter the excessive or inappropriate short-term trading activities.
Such action may, in the Manager’s sole discretion, include the
charging of a short-term trading fee on behalf of the Fund of up to
2% of the value of the series of securities redeemed and the rejection
of future purchase orders where multiple or frequent short-term
trading activity is detected in an account or group of accounts.

AGF is not better, it's full of "may" and "if".


Chances are I'd be the one who'd get dinged with everything..

[Four Pillars]

As posted in my other thread, I'm moving my Dundee account to TDW. I've got quite a few f-class funds in there that were purchased ~40 days ago (moved from regular FE to the f-class so it's a different class thus isn't considered a simple "transfer"). The prospectus mention that there "may" be a 2% short-term trading fee applied if the fund is kept less than 90 days. What are the odds of getting dinged by this? They sure aren't clear about that in their brochure (Dynamic / Mackenzie / AGF). I'd like to get rid of those but not if it means taking a 2% hit..

You need to call the fund companies in question to ask them what the exact policy is.

Some companies have wishy-washy policies which allow them to apply the fees in the cases where someone is doing excess trading with their mutual funds. In most cases (such as yours), the fees won't be applied.

Other companies have solid rules about frequent trading and will apply the fees unless they are waived for some reason.

I'm not clear what your scenario is - are you planning on switching some of your current funds to different funds or selling them? You shouldn't have to pay the fees - going from one class to another is not trading between funds, so the clock didn't restart 40 days ago.

Regardless - give them a call to find out or wait to see if the fees are applied and then call to get them waived in the unlikely event they are charged.

[OhGreatGuru]

If they had a hard-and-fast rule they would be criticized for not exercising any judgment or discretion in deciding if someone is indulging in short-term trading.
Having given their managers discretion, you now want to criticise them for not having a hard-and-fast rule.
We can't have it both ways. As suggested, ask the FI about their policy.

[mart]

My plan is to get sell everything I can and go couch-potato.

I called AGF and the guy said that yes, the fees would apply on everything less than 90 days. He had to put me on hold 2 or 3 times to get that information or figure out what he was doing. I called Dynamic and they transferred me twice and then the person I reached told me that yes, it "may" apply... I inquired a bit more quoting the vague prospectus and asked how I could get a firm answer and she told me she'd look into it she'd look into it. She called a few hours later to tell me it wouldn't apply. I then called AGF and inquired a bit further. They'll call me back tomorrow.

Worst case is I'll wait but I figured that it was an interesting exercise

[OptsyEagle]

The rule should never have been more then 30 days. Since the OSC was vague on what short term trading was, the mutual fund companies all came up with different definitions. The 90 day works in their interests more then anything shorter. 30 days would have more then addressed the concerns that were abound at the time without handcuffing clients that do not partake in the day trading that was very costly to existing unit holders.

By the way, just so that you know, that 2% short term trading fee goes to the fund not the company.

[mart]

By the way, just so that you know, that 2% short term trading fee goes to the fund not the company.

From my point of view, it's the same thing: it's not in my pocket anymore