A fund for snowbirds

In January we added the excellent Clarington Canadian Income Fund to the Mutual Funds Update Recommended List for investors looking for a combination of steady income, safety and tax advantages.

Now the company has added a companion fund that will combine these benefits with a fourth that is increasingly important to many people – currency protection.

The Clarington Global Income Fund is run in the same way as the original Canadian Income Fund, with Peter Marshall of Seamark Asset Management calling the shots here as well. Like the Canadian fund, monthly distributions are $0.08 a unit. That’s not guaranteed but the Canadian fund has been able to maintain that level since it was launched on Jan. 1, 1997.

The new Global Fund will invest primarily in foreign stocks and bonds with a heavy emphasis on U.S. issues. That means most of the currency exposure will be in American dollars. As with the Canadian Income Fund, a portion of the annual distributions will be received on a tax-deferred basis.

Most of Peter Marshall’s work is in managing pension money and he brings the same conservative approach to this fund. Safety of cital is of prime importance and securities are selected with that goal in mind.

The techniques used to generate the high tax-advantaged cash flow are somewhat complex – Clarington describes them as the equivalent of “an internal systematic withdrawal plan”. But they obviously work, as the Canadian Income Fund has demonstrated.

This fund should be of special interest to snowbirds who are in higher tax brackets. Clarington offers the option to take the distributions in U.S. dollars at the current conversion rate, so the fund is a useful way to generate monthly cash flow for covering expenses while you’re outside Canada.

The new fund is eligible for RRSPs and RRIFs as foreign content, but the tax advantages will be lost in case.

Adapted from the April 2001 issue of Mutual Funds Update, a monthly newsletter edited and published by Gordon Pape.