Sunday, May 31, 2009

CMDF, my own toxic asset

Updated February 4, 2010: add VenGrowth Advanced Life Sciences Fund's suspension of redemptions

LSIFs. If you're like me (poor cash drip, investment sense, et al.), years ago you loaded labour-sponsored investment funds (LSIFs) into your RRSP to claim some investment under your name via minimal actual money, and then maybe continued to do so even when the terms lost some of their appeal, and then perhaps even did a roll-over or two with whatever was left, in a futile attempt to come out ahead. Now you're probably getting out of them as soon as practically possible, moving that petty cash into something that doesn't merely recede.

But if you thought you could just mark February, future year(s) in your calendar as the expected day of Redemption (in more than one sense) and forget about it, forget it. Don't, that is.

Things are never easy with these funds. You'd think having invested in them is sufficient punishment. Keeping track of all the renamings and incestuous mergers & acquisitions makes it tough enough (what and how much can I dump this time around after the requisite 8 years?), with no need for added pain.

Festina lente. If you had CMDF (Canadian Medical Discoveries Fund — talk about discoveries...), and didn't yet know any better, you may have noticed in your portfolio its conversion last week to GrowthWorks Canadian Fund. That's all fine and dandy, you're used to this kind of thing, but come next/future February be very careful in your enthusiasm to sell. There is a heavy 35% penalty to pay if you withdraw more that 11.74% in the first, 15% in the second, and 20% in the third year following this felicitous merger. These figures are not cumulative.

This is also explained in a Morningstar article, from which I learned about the CMDF redemption freeze of last year, and that other funds are in a similar predicament. For instance, VALS (VenGrowth's Advanced Life Sciences Fund), which can no longer be redeemed, but will be wound down through annual distributions starting November 2010 and expected to last three to six years.

So I suspect, in case you own these things, that there is a good chance you were already peeved off...


  1. Yeah, that CMDF was an unmitigated disaster. I guess in medical / pharma fields, the investments need to be seen as much longer term than other fields... and obviously longer than the 8 years of the LSIF rules. In other words either cut your losses after the 8 years, or consider is a very "long term" investment :-)

  2. A good deal of my investments take a prompt dive and accordingly become, in short order, long-term... CMDF, and LSIFs in general, stretch it beyond anything acceptable even by my humble(d) standards.