Toronto-based Manulife Financial Corp. has become the latest mutual-fund company that distributes primarily through advice-giving channels to create a reduced-fee Series D for discount brokerages.
In doing so, Manulife has positioned itself to compete on that front with two major mutual-fund rivals: Invesco Canada and Mackenzie Investments (both with headquarters in Toronto), which launched their series late last year.
Setting apart these funds for do-it-yourself investors are trailer-fee payouts to distributors that are substantially lower than for advisor-sold series, and correspondingly lower management fees. For example, the management fee for Series D of Manulife Canadian Focused Class Fund is 1.25%, compared with 2% for the Advisor Series of the same fund.
Manulife has created Series D purchase options for 21 mutual funds out of the roughly 90 in its line-up. It’s a far less extensive offering than those of Invesco and Mackenzie, which chose to make their discounted series available for most mandates.
Still, Manulife’s Series D is more than a token effort. It consists of a diverse mix of seven equity funds, five balanced funds and nine fixed-income funds. Details of these funds and their management fees can be found in the Manulife Mutual Funds prospectus dated August 1.
Unlike Mackenzie’s and Invesco’s Series D funds, which will pay a standard 0.25% trailer fee to discount brokers that choose to sign up as distributors, Manulife plans to take a two-tiered discounting approach. For equity and balanced funds, Manulife matches its competitors’ 0.25% trailer commission. But for fixed-income funds, Manulife will pay trailers of only 0.18%.
To be eligible to distribute Series D funds, a discount brokerage must sign a distribution agreement with Manulife. “We don’t have any agreements in place with discount brokers at this time,” a Manulife spokesperson told Morningstar on Wednesday.
Meanwhile, Manulife has launched two new equity funds and one balanced fund, all with global mandates. Announced on August 5 in a press release, they are Manulife Global Dividend and the similarly managed Manulife Global Dividend Class, along with Manulife Global Strategic Balanced Yield. The portfolios of all three funds are managed by Boston-based Manulife Asset Management (US).
The strategy of Manulife Global Dividend and its corporate-class version is to focus on shares of well managed, dividend-paying companies with strong balance sheets, sustainable and growing cash flows and earnings, and attractive valuations.
The portfolio managers responsible are senior managing director Paul Boyne and managing director Doug McGraw, who will also manage the equity portion of Manulife Global Strategic Balanced Yield.
The fixed-income portion of the balanced fund will be managed by senior managing directors Endre Pedersen and Daniel S. Janis III, along with managing directors John Addeo and Dennis McCafferty.
They will have the flexibility to invest globally in a full range of government and corporate debt securities of any quality or term. The fund’s regional, country and currency allocations will be actively managed, and the holdings may include bank loans, floating-rate instruments and preferred shares.
The new funds are available in various purchase options for commission-based and fee-based accounts, and there are also enhanced-payout options whose monthly distributions may include return of capital.Two of the three funds – Manulife Global Dividend and Manulife Global Strategic Balanced Yield – have Series D versions.