| PIE Funds – Series A |
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SPIVA Reports
(Mutual Fund Scorecard) |
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| The PIE Philosophy: The Value of Indexing |
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PIE Mutual Funds Use
Index Investments
Many factors contribute to overall investment return, but research has shown that tax-efficiency has the largest long-term impact.
The PIE Funds are, above all, tax efficient. Their corporate class structure ensures that there is no taxable disposition on rebalancing. |
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| Passive vs. active style |
| The PIE philosophy is built on an indexing style of investment. Indexes are simply fixed groups of assets whose combined value can easily be calculated and tracked. For example, The S&P/TSX Composite Index is a group of publicly traded Canadian stocks, weighted by market capitalization. The composition of this index changes only if a component member no longer meets the criteria for remaining a member.
A portfolio that duplicates the composition of this index is therefore said to be a “passive” portfolio, because it requires no active day-to-day investment decisions – it simply tracks the performance of its “benchmark” index. And such a portfolio that is issued as a publicly-traded security is known as an exchange-traded fund, or ETF.
The development of modern portfolio theory from what is known as the efficient market hypothesis has evolved into the “passive” investment philosophy that underpins the PIE program. The passive investment philosophy and the theory underlying it hold that the passive index-fund style of investment is more likely to outperform an active management style over time.
Our research has shown that over a 10-year time horizon, the odds of a passive, index fund outperforming an actively managed fund are 90%! The longer the time horizon, the greater the odds that the index-fund style will outperform. |
| The changing index landscape |
| As the popularity of index-style investing grew, the number of indexes and exchange-traded index funds exploded, tracking almost every conceivable type of investment, region, sector, and style. And the growth continues, with index funds that use derivatives to enhance bullish or bearish performance, funds that track fundamental or technical indicators, and so on. The choice has become huge…and so has the opportunity. A cross-section of today’s index fund universe includes indexes that are built using criteria like these:
• Market capitalization, such as the S&P/TSX Composite Index and the S&P 500 Composite Index.
• Price, such as the Dow Jones Industrial Average.
• Classic fundamental ratios, like the FTSE RAFI series of indexes.
• Style focus, such as value or growth. |
 PIE Mutual Funds Lower Your Cost
The PIE Funds use up to 30 exchange-traded index funds to create low-turnover, tax-efficient portfolios. This has the twin advantages of yielding potentially large tax savings and slashing the high management and transaction fees that are typical of actively management funds.
Because they use a cross section of index methods and styles, the PIE Funds avoid the problems that plague many actively managed funds, including investment guesswork, style drift, tracking error, high trading fees.
And to avoid asset weighting surprises, the PIE Funds are regularly rebalanced across all holdings to realign assets back to original target weights.
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