ETFs are a hot topic these days.  As Mark and I highlighted in this post, active ETFs could be a game-changer for the investment fund industry.  In this March 20 Financial Post article, I spoke about the good and bad of active ETFs and the threat they could pose to traditional funds.  One downside not expanded upon in the article is the structure of performance fees on the AlphaPro ETFs.  Let’s use the AlphaPro North American Value ETF (HAV) to illustrate.

HAV will pay a performance fee when it outperforms the S&P 500 Composite Index (C$).  While the prospectus states that the fund will invest “primarily” in U.S. stocks, its holdings include Canadian phone giant BCE Inc., British spirits maker Diageo PLC. – the top two holdings – and cell-phone manufacturer Nokia of Finland.  I have no beef with the ETF’s sub-adviser, Vito Maida.  I was a Vito Maida fan a dozen years ago when seemingly everyone complained about his huge overweight in cheap energy stocks (with crude oil trading well below US$20/barrel) and gold (when it was hovering around US$300) from 1997 to 1999.  I also like flexible mandates as long as a skilled portfolio manager, like Mr. Maida, is at the helm.  But HAV’s performance fee is based on a benchmark that does not fully reflect its flexible policy of investing outside of the U.S.

More generally, performance fee structures leave a lot to be desired in this industry.  Too many are either too richly priced, based on inappropriate benchmarks, lack a high water mark or get added onto already generous base fees.  This Globe and Mail article, from last fall, features hedge fund firms cutting performance fees.  It also revealed that some hedge funds sported performance fees with no high water mark.  But the problem extends beyond hedge funds so this is a topic I’ll be digging into further.

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Everybody seems to be worried about rising interest rates and bond yields.  In this March 13 Financial Post article, I warned that tilting your bond portfolio to hedge one risk usually exposes you to another risk.  Even with these low rates, bonds should remain a staple of virtually all portfolios.  But with today’s heightened valuation risk, investors must choose the risks they want to hedge and those they can live with – because you cannot eliminate all risks and expect to earn more than a T-bill.

Here are this week’s latest media appearances by HighView Financial Group.

In the March 12, 2010 Globe and Mail, I commented on the changing face of Income Trust mutual funds.

In this Wall Street Journal article, I challenge the notion that Canadian hedge funds have offered higher returns (compared to global hedge funds) and the theory vs. practice of including hedge funds in portfolios.

In the February 2010 issue of The Insurance Journal I address the mythical tax benefits of T-series funds.  For more on this topic, see also this recent blog post and this older article from the July 2008 Investment Executive.

In this February 20 Toronto Star article, I challenge the notion that it’s easy to manage your own money.  It is simple but not easy.

In today’s Globe and Mail, I select two mutual funds for investors to consider as they plunk down a RRSP contribution on the last day to contribute for the 2009 tax year.

It’s been a busy month.

I wrote in the mid-February issue of Investment Executive about how the fund industry likes to have its cake and eat it too when it comes to asset allocation.

In the February 23 issue of MoneySense Magazine, I address the risks of locking into 5-year GICs.

Then, in the February 25 Globe & Mail, I provide two ETF picks for RRSP investors.