|New Fund Page Displays Underlying |
Fund Operating Expenses
In December 2011, Manulife Group Retirement Solutions (GRS) updated a number of information resources to include detail pertaining to underlying fund operating expenses (UFOE).
Underlying funds vs. segregated funds
There are two broad categories of funds associated with your plan at Manulife. The first are known as "segregated funds," which are the funds available to your plan members through your group retirement savings plan. Each segregated fund invests in units of one or more "underlying funds" which are usually pooled or mutual funds. Your plan members do not invest directly in underlying funds, and values of the segregated funds available in your plan will vary in proportion to the value of the underlying fund(s).
All funds charge fees for activities associated with their operation. Each segregated fund charges an investment management fee (IMF) associated with it, as determined by Manulife. Typically the IMF includes charges for these components:
Beginning December 31, 2011, electronic versions of individual fund pages will feature information about the underlying fund's operating expenses.
- recordkeeping and service fees;
- operating expenses for creating the unit value for the segregated fund and other related expenses (legal, audit, custodial etc);
- operating expenses for the underlying fund (in some cases).
Why disclose underlying fund operating expenses?
Many clients – along with their advisors and consultants – request this information, so GRS is including this detail to increase the transparency of investment information clients receive. Detail will appear on the fund pages available on the secure sites for plan sponsors, plan members, advisors and consultants.
Each fund page will display UFOE information as a percentage of the underlying fund's assets or will indicate that the underlying fund's expenses are included in the segregated fund's investment management fee. Examples of these displays appear below.
If underlying fund operating expenses are expressed as a percentage of the underlying fund's assets, the percentage may vary from year to year and will generally decrease as the fund's assets under management increase. Typically, underlying funds that are retail mutual funds may have operating expenses of 0.10% or higher. If the underlying fund is a pooled fund, these expenses are typically lower.
- "The Manulife McLean Budden Balanced Growth Fund has underlying fund operating expenses of 0.0126% (as of December 31, 2010), which are not reflected in the IMF", or
- "The underlying fund operating expenses for the Manulife Canadian Large Cap Value Fund (MAM) are not separately disclosed by the fund manager, and are included in the segregated fund's investment management fee."
Please note: Disclosing UFOEs has no effect on current or future rates of return for Manulife segregated funds or plan members' personalized rates of return. UFOEs are not a new or a recently-added cost; they have always been charged by the manager of the underlying fund and are now simply being discplayed more clearly.
Informing plan members about this change
The following message appears in the Bulletin Board section of the annual plan member statements being released in mid-January:
The Investment Management Fees (IMFs) shown in the Your plan's investments section of this statement incorporate all of the operating and supporting expenses Group Retirement Solutions incurs to administer a segregated fund, except applicable taxes. To see details of a fund's expenses, login to your account and select 'My Investments,' then 'Investment Information,' and click on the name of the fund.'Beginning in 2012, a footnote containing similar language will appear on the rate of return summary included in Fund Selection Guides provided to plan members.
Text on the plan member website at www.manulife.ca/GRO currently includes information on the investment management fees, the services and expenses they cover, and how the IMF affects members' unit values. In January, this text will be updated to include a definition of underlying fund operating expenses.
If you have any questions about these changes, please feel free to contact the Customer Service Centre at 1-888-713-7788. Representatives are available to assist you Monday to Friday, from 8 a.m. to 6 p.m. ET.