Q&A: Don’t know what they own
Question: We have some money invested in CIBC CI M.A.X. Deposit
Notes Series 1. I am unable to find out exactly what is in this investment. My
advisor is of no help. Can you help me with this? — C.& C.
Gordon Pape answers: My first reaction is to question why
you would invest in something without knowing what it was. My second reaction
is to suggest you fire the advisor. If he/she can’t tell you anything about
a security you own, there is something seriously wrong — either the advisor
is too lazy to do a little research or is inept.
It took me about three minutes on the Internet to identify your security. It
is a principal-protected note (PPN) that was issued by CIBC World Markets in
the fall of 2005. The note tracks the performance of the CI Signature Income
& Growth Fund, a conservatively-managed fund run by Eric Bushell. The notes
mature on Nov. 15, 2013 so you’re locked in for the long haul. At the time of
issue, CIBC said it would endeavour to maintain a secondary market for the notes
but if you try to sell in that way it will usually be at a heavily discounted
Unfortunately, the returns so far have not been good. The notes lost 14.3per cent
over the year to Aug. 31 and at that point showed an average annual loss over
two years of 7.3per cent.
Of course, there is a lot of time to recover and the notes may eventually work
out for you. But your experience to date, and the apparent inability of your
advisor to be of any assistance, is a prime example of why I never recommend
the purchase of PPNs.
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