# Purpose Core Dividend ETF (PDF)



## Belguy (May 24, 2010)

In the July 25 issue of the Toronto Star there is an article by Gordon Pape titled 'A new dividend fund with plenty of promise'. In it, he describes Som Seif's new Purpose Core Dividend mutual fund with a fee of 1.55 per cent. Because of it's lower fee, I am interested in the ETF version of this fund which trades under the cymbal PDF with a management fee of 0.55 per cent. This ETF is described as "the only dividend fund that you will ever need". As I am considering this for my unregistered account, I would appreciate your thought and comments on this dividend ETF. Thank you.


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## jargey3000 (Jan 25, 2011)

Me too! (not sure I buy everything G Pape sez tho'...)


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## doctrine (Sep 30, 2011)

It's 50% Cdn and 50% US, and is certainly underperforming an equal weight of the TSX Composite and S&P 500.


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## tkirk62 (Jul 1, 2015)

First thing to keep in mind is the MER is actually .73%, not .55% like you think. Not a big difference but it is noteworthy. After the MER is taken away the yield is really only 2.46%. That's not much more than the 1.39% real yield you could get with VUS. Personally I don't find the yield enough to justify the MER if I'm looking for dividends. 

Second is the holdings. Three out of the 40 equally weighted holdings are tobacco companies. You can make the choice to invest in these companies, but you should know you are investing in them through this fund. 23 of the holdings are holdings that are likely in every Canadian dividend ETF (the big banks, SU, ENB, IPL, etc). The US holdings, including aforementioned tobacco companies, are interesting, but not worth the MER. I truly do not want to turn this into an ethical investing thread. 

Nothing seems special about this ETF to me. If I were looking to invest in dividend ETFs, I would choose my desired allocation to the US and Canada, then split my money between ZDV and ZDY. The MERs are about half of PDF, the yields on the two funds will combine to exceed PDF's, you get more diversity by holding the two funds. I don't see any compelling reason to hold PDF.


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## humble_pie (Jun 7, 2009)

the company's website states that its management fee is .55% but its MER is .73%

to that one would have to add the TER, or trading expense. I don't know whether the costs of hedging the US holdings are included in the MER or the TER or whether they are in addition to both.

since a conservative TER usually adds .25%, it's likely that total costs in this fund would round up to somewhat more than 1%, which is in line with countless other advice providers. Neither higher nor lower. Certainly not cheap.

this fund's total list of holdings looks acceptable, if run-of-the-mill. But since the fund is new & has no trading history, what would be the rush to acquire it? there are proven dividend funds aplenty.


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## My Own Advisor (Sep 24, 2012)

Agreed - most of the holdings are likely in every Canadian dividend ETF (the big banks, SU, ENB, IPL, etc). This is why I've personally unbundled my CDN stocks and hold them directly. 

The question you have to ask yourself, is the active money management able to overcome the fees to beat the index consistently? Not so sure but time will tell...


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## mrPPincer (Nov 21, 2011)

Well, from a personal point of view, from watching CBC programs, I am well familiar with Som Seif, and when he talks.. I Listen, his on-air viewpoint have always been quite insightful and valuable.

That said I'm not gonna pay anybody a MER of 1.55% [the 0.55% .. no, 0.73% MER (thanks h_p, I type slow so I caught that) for the ETF does seem reasonable (scratch that, semi-acceptable now, compared to 0.55) to me for the brainpower that seems present, but that's just my opinion, and even so, it's still not something I'll gamble on].
___

Haven't watched Amanda Lang's show for quite a while because of her repetititve academic assumptions regarding the dissolution of supply management. She is clueless how much it would hurt this country's ability to feed itself as well as the quality of the meat (which I suspect she wouldn't even be able to notice, but meh, who knows), as well as well as the fact that a major industry composed of self-sufficient well-rounded go-getters (I'm talking about our farmers and their families) would be reduced to land-owning or land-renting serfs working under contract for one dude down in the states (or overseas for that matter), just as it is down below the border right now.

Used to watch it daily every morning, but unless she gets her head screwed on straight I'm done with her show.
IMHO when CBC were cleaning house they should have tossed her out too.. at the very least before they turfed Evan Solomon, who's _discretions_ (questionably so) were far less than Amanda Lang's (definitely)*, and his reporting and thoughts were far more valuable (got to admit Amanda Lang though, did do some very good interviews).
*https://en.wikipedia.org/wiki/Amanda_Lang

Danielle Bochove should be the anchor, absolutely.
Amanda Lang doing work as a guest host / interviewer?
I'd come back for that. Just an opinion.. but I am somebody who gives a damn..
___ 

^apologies for the CBC rant, hope it doesn't derail anything, we were talking about Som Seif's new funds


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## james4beach (Nov 15, 2012)

humble_pie said:


> ... MER is .73% ... add the TER ... I don't know whether the costs of hedging the US holdings are included in the MER or the TER or whether they are in addition to both. ... it's likely that total costs in this fund would round up to somewhat more than 1%


Well said. Yes, it's not cheap. The MER alone of 0.73% already is very high for an ETF and as you point out, total fees are more like 1.00%

Cost of hedging is really tricky. They may have included the cost of trading the currency derivatives, but they definitely don't include the resulting *inefficiency* of currency hedging. Nobody does.

So I will point out, through Canadian Capitalist's now famous analysis of the performance cost of currency hedging, we've discovered ... to our horror ... that currency hedging introduces a performance drag of between 1.0% to 2.0%. You might consider that as part of your hidden 'fee' as it has the same effect.

Thus it appears this dividend fund's total effective fees / performance drag is something on the order of 2.0% or more -- that's unacceptable.

Either hold the individual stocks directly, or buy a low-MER TSX and S&P 500 index fund and consider it done. I find it very unlikely that PDF will be able to surpass that 2.0% fee/drag


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## My Own Advisor (Sep 24, 2012)

I've had the chance to meet Som a few times. Very bright guy. A very successful businessman. A cool guy to talk finances with. That said, I just don't see the people running the fund beating it's benchmark index consistently and overcoming those fees in the process. I could of course be totally wrong. 

Am I converted to an indexer? No, but indexing just makes sense for so many reasons so either buy and hold a multitude of stocks directly or buy some very low cost ETFs or other funds, or a hybrid, do both. Otherwise I think you might be rolling the dice.


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## Belguy (May 24, 2010)

Perhaps I will just stick with VCN and VUN.


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## purpose_dan (Jul 30, 2015)

Hi guys, I'm Dan, with Purpose and thanks for talking through the Purpose Core Dividend Fund, PDF. I wanted to pass along a few facts just to make sure everyone had all the right info. First, it is a very powerful fund because of its focus on quality dividend, not just dividend companies’ and‎ broad sector diversification. The MER is 0.73% for the ETF series, and the TER is 0.78%. The net yield to investors is in fact 3.19%, net of the MER.

Also, important to note is PDF is in Corporate Class form meaning it's 3.19% yield is in fact very tax efficient. Unlike normal US dividend ETFs which are taxed as foreign income, PDF is a big advantage. 

I know lots of people focus on Vanguard because they are cheap, but if you have followed Som Seif over the years, you'd know he really pushes people to think that fees matter, but just because something is cheap doesn't mean it's good. It's about getting the best strategy coupled with low fees. PDF is an attractive fee, but it’s the added value that is what makes the massive difference on top of this. 

Happy to chat if anyone has any thoughts or comments.
Dan


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## My Own Advisor (Sep 24, 2012)

Great to see you chime in Dan. Would you say this is the biggest drawing card for investors, with PDF, the opportunity to own this product in a taxable account given the Corporate Class structure?


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## purpose_dan (Jul 30, 2015)

My Own Advisor said:


> Great to see you chime in Dan. Would you say this is the biggest drawing card for investors, with PDF, the opportunity to own this product in a taxable account given the Corporate Class structure?


I would say that there are 3 great features about this fund
1. Tax efficient distributions. To your point, being that the Fund is in a corporate class structure distributions are paid as Canadian dividends or capital gains
2. High quality portfolio. The Fund is comprised of 40 high quality companies which have the ability to grow both their business and dividends
3. Tax free switching. Again the advantage of being in a corporate class structure allows investors to move between our strategies, within the corporate class, without triggering a taxable disposition. 

If you have other questions on the fund or any of Purpose's funds i would be happy to answer


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## humble_pie (Jun 7, 2009)

so the real advantage of this ETF is that, although it's expensive - with an astonishing MER/TER expense ratio of 1.50% (.73 + .78) - its corporate class structure can benefit investors by delaying capital gains upon final disposition while investors switch among other funds in the family?

corporate class funds are notoriously expensive, i would imagine that 1.50% is lower than fees & costs charged to traditional corporate class mutual funds, though.

but in reality, how do these funds work out long-term? are there any studies? will savings from delaying capital gains necessarily be greater than that 1.50% chopped out of capital every single year? i'm mindful that eventual gains are maybe/iffy while the relentless 1.50% is going to be charged every single year, no matter what.

a possible advantage in this fund might be that US dividend income, which is normally 100% taxable to canadians as other income or foreign non-business income, might get transmogrified into favourably-taxed capital gains distributions (purpose_dan describes current income as being only canadian dividends or capital gains, surely US dividends cannot be twisted into canadian dividends by any stretch of accounting logic.)

might i mention also that a .78 TER is on the high side, it indicates a fairly high trading frequency for the holdings, i'm wondering whether frequent trading is appropriate for a dividend fund?

lastly, advertising can claim that a fund holds well-chosen stocks, therefore it's expected to out-perform. But a discussion group such as a forum can't really endorse such a view. This fund has no trading history. The most that can be said is that a well-known financial expert owns the company that hired the portfolio managers who hand-picked the holdings.


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## mrPPincer (Nov 21, 2011)

Humble, I'm assuming in this case the term TER is used as Total Expense Ratio, (which includes MER), not as Trading Expense Ratio, which is a different thing, but perhaps purpose_dan will clarify for us.


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## My Own Advisor (Sep 24, 2012)

Trading Expense Ratio (TER) is a measure of a fund’s trading costs. So, higher TER equals more active trading and management. 

As an investor, this is just my take, I prefer investing in products with low turnover rates. TER is independent of a fund’s MER (management expense ratio)


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## mrPPincer (Nov 21, 2011)

In any case, (even if the 0.78 % is total expense ratio), as James pointed out re CC's analysis, hedging comes at a cost, and since this fund is 50% US equities an additional performance drag of something like 1% or so should be expected based on the performance of the other hedged funds out there.



james4beach said:


> Cost of hedging is really tricky. They may have included the cost of trading the currency derivatives, but they definitely don't include the resulting *inefficiency* of currency hedging. Nobody does.
> 
> So I will point out, through Canadian Capitalist's now famous analysis of the performance cost of currency hedging, we've discovered ... to our horror ... that currency hedging introduces a performance drag of between 1.0% to 2.0%. You might consider that as part of your hidden 'fee' as it has the same effect.
> 
> ...


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## mrPPincer (Nov 21, 2011)

My Own Advisor said:


> Trading Expense Ratio (TER) is a measure of a fund’s trading costs. So, higher TER equals more active trading and management.
> 
> As an investor, this is just my take, I prefer investing in products with low turnover rates. TER is independent of a fund’s MER (management expense ratio)


I've always read TER as Total Expense Ratio.
http://www.investopedia.com/terms/t/ter.asp

But, it seems you are right according to this page I found that breaks it down

http://wheredoesallmymoneygo.com/ter-the-trading-expense-ratio-or-total-expense-ratio/


> Here’s a little breakdown…
> 
> In the UK the TER stands for Total Expense Ratio and is equal to the US or Canadian definition of MER
> 
> ...


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## humble_pie (Jun 7, 2009)

^^

good thing you pointed all this out.

me i've only heard of Trading Expense Ratio but that .78% figure as a trade measure in purpose dan's explanation would be far too high for a dividend fund.

if the MER & the trading expenses are both included in a Total Expense Ratio of .78, then the trade part breaks out to only .05, which is certainly reasonable.


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## mrPPincer (Nov 21, 2011)

If it is in fact Trading Expense Ratio, it could be initially high due to it being a new fund, but after looking at their site, it looks like it went IPO on August 27 2013 at $20, so that doesn't make sense either, unless the new numbers aren't out yet, or the fund has been growing fast lately, or there is a bunch of churning.

I don't see anything on their site about TER, so we'll have to wait on Dan to see which definition of the acronym he meant.
I still suspect it's the US version of Total Expense Ratio.


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## james4beach (Nov 15, 2012)

Why don't we just look at the financial statements? See the 2014 MRFP (which coincidentally is a pdf !)

MER is 0.73%
"Trading expense ratio" is 0.05%
Portfolio turnover rate is 65%
... Note that there was an enormous increase in fund size from 2013 to 2014, so perhaps that warps the turnover rate?

Fees are 0.73% + 0.05% = 0.78%
On top of this we'd estimate FX hedging drag of 1%
Resulting in *total effective fees of approx 1.8%*


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