# CIBC Managed Monthly Income Balanced Fund -deal or no deal?



## dogleg (Feb 5, 2010)

The bank where my wife has her TFSA wants her to switch from the exchange traded funds she has to this 'managed' fund. They charge 2% and in my opinion their fund isn't doing any better than the index it follows from what Morningstar shows. Unless I am missing something I think she is better to stay with the ETFs she has. I welcome your input.


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## OnlyMyOpinion (Sep 1, 2013)

Well its to be expected that they would try to move you into their own high mer (2.2%) products. It sounds like you guys have your own plan and ideas though so I would stick to my guns and just politely say "thanks, but no thanks". 

Now, is her etf comparable in content and have you compared her etf results to CIB842? It looks like it is a balanced fund of funds, incl US (5%) and Int exposure(5%).

If you are inclined to discuss further and/or have a deeper relationship with your CIBC rep, you might want to show them the attached graph and ask them about the performance difference between CIB842 and MAW104 (mer 1%). Maybe ask why they aren't suggesting several alternatives to you depending what your TSFA money is intended for (I'm being facetious):biggrin:
Also, CIB842 performance suggests it pays out most of its growth each month, possibly roc as well as dividends? Is this monthly income what you are wanting or are you wanting more capital growth (I suspect).

View attachment 6625


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## dogleg (Feb 5, 2010)

Thanks OMO. The Mower funds show quite remarkable performance. Have you invested in them for a while if you don't mind me asking? You are dead on, the banks will push almost anything to generate fees. It is a constant battle it seems to keep ahead of all the things that eat away at our savings.


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## james4beach (Nov 15, 2012)

There's another thread that lists a few well performing Balanced Funds. (The monthly income funds are close to 50/50 balanced funds)
http://canadianmoneyforum.com/showthread.php/59137-RBC-Monthly-Income-Fund


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## OnlyMyOpinion (Sep 1, 2013)

dogleg said:


> Thanks OMO. The Mower funds show quite remarkable performance. Have you invested in them for a while if you don't mind me asking? You are dead on, the banks will push almost anything to generate fees. It is a constant battle it seems to keep ahead of all the things that eat away at our savings.


Yikes, I opened the attached file and see that there was some kind of glitch at the start of the MAW104 data and the CIB started slightly after 10yrs. So I have replaced the eralier graph with a 5yr graph, plus it also includes reinvested dividends as well. Also added CIBC bank stock (CM) for fun. 
As I mentioned above, I suspect CIB842 has grown more modestly because it maintains a high payout that includes some roc,but I haven't confirmed that.

Re/ MAW, in hindsight, we'd have liked to have been in it longer than we have been.


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## dogleg (Feb 5, 2010)

OMO: Thanks. I used the Google Finance graphing and it shows an Oct 20th spread between the two of around 55% with a five year zero starting point. Have I got this wrong?


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## OnlyMyOpinion (Sep 1, 2013)

dogleg said:


> OMO: Thanks. I used the Google Finance graphing and it shows an Oct 20th spread between the two of around 55% with a five year zero starting point. Have I got this wrong?


No your graph is correct, but it only shows the % growth in the unit value. It does not include the dividends paid out. Your graph shows a growth in CIB842 unit value of 1.79% over 5 years, but if you look up the fund returns you'll see that it reports an annual return of 4.37% over 5 yrs - that return will reflect both the increase in unit value and the monthly dividend payouts. 

The graph I attached upthread is from http://web.tmxmoney.com/charting.php?qm_page=42666&qm_symbol=CM which allows you combine both (i.e. DRIP the dividends) and graph that compound growth. That's why it shows 22.3% over 5 yrs (or 4.37% yr compounded).


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## dogleg (Feb 5, 2010)

Thanks James that data is very helpful.


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## dogleg (Feb 5, 2010)

Thanks OMO the TMX graphing is very helpful.


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## OhGreatGuru (May 24, 2009)

dogleg said:


> The bank where my wife has her TFSA wants her to switch from the exchange traded funds she has to this 'managed' fund. ...


Who at the bank is telling her this? I presume her TFSA is with CIBC Investor's Edge, their on-line trading account, if she is holding ETFs. The staff in the retail branch aren't qualified to provide advice to people with on-line trading accounts, because they are only trained in selling CIBC mutual funds. If the advice is coming from CIBC Investor's Edge, she could ask for an explanation of why they made such a recommendation (Maybe her current holdings don't match her profile? Maybe her transactions are unreasonably high for a small portfolio?) Otherwise tell them to take a hike.

Or have you confused simple advertising of a particular product with an actual recommendation to switch assets?

PS. In any case the fund in question is a portfolio fund with dismal ratings and a rather high MER for its class. I wouldn't recommend it to anyone who did want a neutral balanced monthly income mutual fund.


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## dogleg (Feb 5, 2010)

OGG: Thanks for your input. Yes she had some ETFs with Investors Edge and some TFSAccounts with Tangerine and BofM and the discussion with her CIBC bank contact came about when she mentioned she wanted to consolidate her TFSA in one place. Of course their solution was to bring it all into CIB842. I agree with you it is a dog. When I asked them to describe its six month performance they said it currently showed a 1.91% loss. I think it is closer to 5.5%.


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## dogleg (Feb 5, 2010)

James4Beach: Your comparison data for ETFs and Mutuals is interesting. In her discussion with the bank my wife asked them what investor profile they used to determine if a capital appreciation or an income fund was more appropriate for a TFSA .How would you answer that question if you don't mind me asking you about it? Thanks.


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## wendi1 (Oct 2, 2013)

Dogleg, your wife is smart. CIBC should have known her "investor profile", her comfort with risk, what she intended the TFSA for, and when she anticipated needing the money before they recommended anything.


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## james4beach (Nov 15, 2012)

dogleg said:


> my wife asked them what investor profile they used to determine if a capital appreciation or an income fund was more appropriate for a TFSA .How would you answer that question if you don't mind me asking you about it? Thanks.


That sounds like a good question but there's another way to phrase it too. I think there are two questions:

(1) How much risk?
(2) How much income/distributions?

These two things can be varied independently of each other. (1) guides allocation between equities and fixed income. (2) guides the payout and distribution style. You can get arbitrarily large distributions no matter what the asset holding is, which is why I see these as independent.

And all combinations are possible! The usual monthly income funds match this profile: (1) medium, (2) high

Another example, we have things like iShares XTR which I would characterize as: (1) high (2) high

Notice that XTR calls itself a monthly income fund -- because its distributions are high -- but in fact is considerably riskier than the usual bank monthly income funds. This is why I like looking at these two dimensions instead of just using an "income" categorization, which can be highly misleading.


*(1) Risk**(2) Distributions**Example*LowHighBonds with large coupons (james4beach)LowLowGIC ladder (james4beach)MediumHighCIBC or RBC monthly income fundMediumLowXIC + XSB, cheaper than monthly income fundsHighHighXTR... I'll argue that this combo is misleadingHighLowStock index fund

Finally, realize that anything can be made into "high distribution" by simply selling shares and withdrawing cashflow. The monthly income funds do it automatically, but you can equally well generate high distributions from an index fund portfolio. This is why I think the key question is RISK, not whether something has an income stream.


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## doctrine (Sep 30, 2011)

The funny part about the CIBC and RBC monthly income fund, is you can definitely replicate the asset allocation with XIC / XSB or XBB and even achieve the same distribution by selling small portions. But, it looks like these CIBC/RBC funds have quite outperformed their indexes on a total return basis. 

That might not be true going forward, but those funds seem to be doing well, so for someone who has been in them 10-15 years with outstanding returns, it might be hard to convince them to switch.

After all, for example, RBC/CIBC Income funds aren't holding Valeant, which was 6-7% of the TSX index and wiped out 3-4% just on its own with its massive drop. They are also extremely light on the volatile materials/mining sector, which tend to have no income (or at best risky income) either.


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## james4beach (Nov 15, 2012)

I agree, those particular monthly income funds seem to have a superior total return (after fees) and that's ultimately what matters. True, it would be hard to convince someone to switch. They look like good funds.


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## dogleg (Feb 5, 2010)

The Mawer funds(ie MAW104) are impressive certainly as compared to CIB842 for example. Is there a downside? Is this the wrong time to buy one?


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