bout de papier, Vol. 7, No. 4 (1990), pp. 33–34
Dennis Baker, Ron Berlet and Ray Guy, three long time members of Canada’s Foreign Service, have at least one thing in common. All have been Presidents of Tradex Investment Fund Ltd., a mutual fund originally created exclusively for Foreign Service Officers, but now available to all employees of the Government of Canada and their families. This year, the thirtieth anniversary of its founding, Dick Ballhorn, currently PAFSO Treasurer, serves as one of the ten members of the Board of Directors, maintaining the tradition of active involvement by Foreign Service Officers in Tradex affairs. Dick is one of at least two dozen such people, including former officers like Gordon Osbaldeston, who have served as Tradex Directors over the years.
Tradex, a name associated with stock market trades, actually reflects its origins. Trade and Commerce and External Affairs, whose representatives founded Tradex in 1950, lent their names to what was then a pioneering venture. Only twenty funds investing in Canadian equities existed, and RRSPs, which now account for over half of Tradex assets, had yet to be introduced.
Tradex shareholders now number close to 5000, about 200 of them being members of External Affairs and their families. Assets in the Investment Fund have grown to more than $40 million, yet the majority of shareholders have $5,000 or less invested. At present, an account can be opened with as little as $50, and any subsequent payment needs be no larger. Hundreds of shareholders take advantage of this feature by arranging the automatic withdrawal of funds from their chequing accounts for the purchase of shares. By doing so, they gain the added advantage of averaging their cost per share over the inevitable ups and downs of the stock market.
The performance of Tradex Investment Fund is its most attractive feature. Investments are managed by Bob Bernardo of Sceptre Investment Counsel Ltd., Toronto, a man described by the Globe and Mail in a February article as one of Canada’s top six mutual fund managers for the 1990’s. Mr. Bernardo has selected the investment portfolio for Tradex since 1969, and has put Tradex in the top three of all Canadian equity funds over the long-term, i.e. 12-15 years. Over the ten-year period ending December 31, 1989, the average annual compound rate of return, with all dividends reinvested, was 14%. During calendar 1989, the corresponding rate was 18.1%. Most of the Investment Fund holdings are in Canadian quality growth stocks or in Treasury Bills. No more than 10% of its holdings may be in foreign stocks, making it RRSP eligible.
Another very attractive feature of Tradex is its low cost. Operating from a single office in downtown Ottawa, without any sales representatives, costs are kept to a minimum. There are no sales commissions or redemption fees of any kind to pay, except a $7 administrative fee for RRSP holders. Total expenses in 1989 amounted to 1.2% of assets, and compares favourably with other funds. Members of the Board of Directors serve without remuneration.
All that is required to open a Tradex account is to complete an application form. Forms, accompanied by a Prospectus and financial statements, can be obtained by writing to Tradex at 77 Metcalfe St., Suite 701, Ottawa, Ont. KIP 5L6. Wendy Rosebrook, Gordon McCormack or Andy Billingsley would be glad to assist or advise in any way. Both the latter are former public servants with experience in external trade promotion, and have served as Presidents of Tradex. Shareholders receive reports semi-annually on the status of the Fund and its investment portfolio plus a personal annual statement recording the year’s transactions. Each purchase or sale is of course confirmed at the time of the transaction.
The price of Tradex shares is calculated weekly, which saves considerably in costs over those funds with daily pricing. Each Tuesday, the new price is published in the financial pages of Canadian daily newspapers, under “Canadian Mutual Funds” and is repeated daily through the week, and in the financial weeklies. The price also is included each Tuesday in Press Scan.
In response to those who wanted a more conservative investment vehicle, a new fund was launched last September. The Tradex Security Fund, in six months, has attracted over $5 million in assets, all of which are invested in Government of Canada securities, such as bonds and Treasury Bills. Investment management for this Fund is also in the hands of professionals, Elliott and Page Ltd., Toronto. Performance for the first six months has indeed been impressive, with a ranking near the top among all Canadian bond funds. This Fund is administered in the same way as the Investment Fund, by Canada Trust, and those who are members of both Funds can move assets from one Fund to the other without charge, with simply a written request. The majority of Security Fund unit holders also hold shares in the Investment Fund. By investing equal amounts in both Funds, they create an equivalent to the “balanced funds” available elsewhere.
The main advantage of buying government securities through the Security Fund is liquidity. The investor now has a choice between a fixed rate of return for periods of one to five years with a GIC, or receiving a high return with the opportunity of redeeming units any week. The minimum initial investment in this Fund is $500., with subsequent purchases of $100. By comparison, the minimum purchase for a Treasury Bill is $5,000.
Both Funds are popular investments for RRSP’s, and more and more people are discovering that switching other RRSP’s to a Tradex RRSP can be done without charge and by completing a single form. Because the income distributed to Security Fund unit holders semi-annually is treated as interest for income tax purposes, this Fund has extra benefits as an RRSP tax shelter.
Many with children under the age of 18 are creating Tradex accounts for each child, and regularly depositing their Family Allowance cheques in these accounts. All the income generated by such investments is attributed to the child, and thus again sheltered from income tax. The regular deposit of such cheques, from birth to age 18 would result in a sum of $18,500 — based on a compounded 10% rate of return, and on existing Family Allowance rates of $33.33.
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This kind of return is a reminder of the benefits available to those of all ages from regular small Tradex purchases. A Pre- Authorized Chequing Plan in either Fund is now an alternative to purchasing Canada Savings Bonds by payroll deduction.
Upon retirement and reaching the age of 71, RRSP holders have the option of opening a Tradex RRIF or Registered Retirement Income Fund. Such a Fund provides an annual minimum payment, payable in up to four installments each year, until age 90, with the flexibility of withdrawing lump sums at any time. Tradex thus truly can provide benefits to all those from birth to age 90 and beyond, and is proud to have shareholders who have been with the company since its inception in 1960. One such person is the founding President of Tradex, Tom Fletcher who at that time was a Foreign Service Officer. Tom, now retired from a distinguished public service career, rejoined the Tradex Board of Directors this year, and the company looks forward once again to the benefit of his insight. Tradex owes its existence to members of the Foreign Service, and is encouraged by the commitment of such people to its continued success.
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Originally published in bout de papier, Vol. 7, No. 4 (1990), pp. 33–34. Read the rest of this issue →
