Worried about investing in small fund

Question: I have read your comments with regard to the Chou RRSP fund, and have done my own research as well. I am aware that there are no guarantees as to whether my money will grow in this or any other fund, but I am concerned about the safety of the money I have. What protection does the individual have when investing in this kind of fund, administered by a very small company or even just an individual? The banks offer a small protection, I believe $60,000, but does the government or any body offer protection in this case (RRSP investment in a self-administered fund). I would really appreciate your insight and any information you may be able to offer. – Dr. P.S.


For starters, let me clarify two points. First, you mention bank protection of $60,000. This is incorrect. You are referring to coverage provided by the Canada Deposit Insurance Corporation (CDIC). This does not extend to mutual funds of any kind, only to deposit accounts and GICs.

Second, most mutual fund assets are held in trust, including those of the Chou funds. They do not form part of the corporate assets of an individual or company. The website of the Investment Funds Instite of Canada describes the situation this way: The assets of the funds are owned by the investors and held on their behalf by a custodian bank or trust company separate from the fund manager.

I give a high rating to both of the Chou Funds in my 2003 Buyer’s Guide to Mutual Funds, and both are on the Recommended List of my Mutual Funds Update newsletter. They have remarkable records. Over the three years to Feb. 28, while the bear market was socking most equity funds hard, the Chou RRSP Fund gained an average of 24.6% a year, while the Chou Associates Fund, which focuses mainly on U.S. stocks, had an average annual rate of return of 21%.

Of course, there is no guarantee this will continue, and you should never commit all your money to one fund or even one fund family. Consult a financial advisor before making a final decision.

If you’re interested in tracking my views on these and other funds, we you may wish to subscribe to the Mutual Funds Update newsletter. You’ll find details at of our special trial offer at http://www.buildingwealth.ca/promotion/50plusproducts.htm

I hope this helps. – G.P.