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Companies react to change in rules for corporate class funds

By Andrew Rickard | April 08 2016 10:45AM

A number of mutual fund companies have responded to the budget proposals which, if implemented, will eliminate tax-free switches for corporate class funds on October 1.

In its announcement Desjardins Group noted that, even after the change, corporate class funds will still have other advantages "such as sharing of income and expenses between all of the funds within a single corporation, and distributions made in the form of Canadian dividends and capital gains". At total of 18 funds at Desjardins will be affected.

Closely monitoring this development

26 funds will be affected at iA Clarington. While the company does not currently plan to make any changes to its corporate class fund structure in response to the budget changes, iA Clarington says it "will continue to closely monitor this development".

At TD Asset Management, 21 classes in its line-up will be affected. The company says it also "continues to assess the implications of the 2016 Budget Proposal."

Awaiting further guidance

The budget changes will apply to 40 corporate class funds at Mackenzie Investments as well as 15 funds that are managed by Mackenzie and distributed by Quadrus Investment Services Ltd. Mackenzie says it is “awaiting further guidance from the federal government.”

Like many other firms, Manulife Financial indicated that it is still "assessing the implications of the announcement", but the company does note that if the budget proposal becomes law, investors who hold one of its 41 corporate class funds will no longer be able to conduct switches without realizing a taxable capital gain.

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