Renaissance fund capped

One of the top-performing funds on my Mutual Funds Update Recommended List has been capped and new units can only be purchased by those who held positions prior to the close.

CM Investment Management, the CIBC subsidiary that runs the Renaissance Funds, decided that their popular Renaissance Canadian Income Trust Fund had become too large and closed off sales at the end of January. The fund currently has assets of more than $640 million.

However, the move may have had just as much to do with a desire to earn bigger profits from burgeoning income trusts sector. Renaissance replaced it with a brand-new fund, Renaissance Canadian Income Trust II, which has the same manager, Gaelen Morphet, and operates under the same mandate. The two portfolios have similar holdings, with eight of the top 10 securities being the same, although in somewhat different proportions. The newer fund tends to take larger positions; for example 8.6% of its portfolio is tied up in Enerplus Resources Fund, its number one holding, whereas the same security in the original fund accounts for 7.1% of total assets.

The main difference between the old fund and the new one is a higher management fee (2% vs..5% for the original) and a reduced distribution policy. The new fund makes monthly payments of 6c per unit whereas the first one pays 6.25c. This combination of higher fees and lower payouts make the new fund less attractive and I am not recommending it at this time, despite the excellent management and good track record of the original.

Adapted from an article that originally appeared in Mutual Funds Update, a monthly newsletter that offers practical advice on portfolio building and fund selection for investors. For subscription information: