Invesco Canada Ltd. has pioneered a new platform for the purchase and sale of mutual funds, resulting in a more streamlined process and lower management fees for investors.
Specifically, Invesco has developed a new line of platform-traded funds (PTFs) consisting of existing Invesco-sponsored mutual funds to be sold to investors who have discretionary or non-discretionary accounts with fee-based advisors. PTFs are restricted to firms that are members of the Investment Industry Regulatory Organization of Canada.
Like a stock, each PTF has a trading symbol, and although the PTF will transact and settle like a stock on the firm’s trading system, it doesn’t actually trade on a stock exchange. Instead, advisors enter buy and sell orders on their firm’s securities trading systems throughout the day on behalf of their clients. Orders go directly from each firm’s retail trading desk to Invesco’s order-management system.
At the end of the trading day, Invesco will consolidate all the orders on behalf of each firm and then deliver either payment or fund units to each firm’s account within the required three business days. Invesco acts as the “guaranteed counterparty,” working with the back office of each participating IIROC firm, says Peter Intraligi, president of Invesco Canada.
“It’s a new way to transact in mutual funds, using the same equity trading systems that dealers already use to trade stocks and exchange-traded funds,” Intraligi says. “Operationally, the fund transactions will be settled like a security, but the PTFs are not listed on a stock exchange.”
On average, the management fees of PTFs will be about 28% lower than comparable Series F mutual funds that fee-based advisors typically use. For example, Trimark Global Dividend Fund PTF, sponsored by Invesco, has a management expense ratio of 0.9% compared with 1.34% for the global dividend fund category’s average MER, as measured by Morningstar Canada. Every investor benefits from the same lower management fee regardless of account size.
Trades will be settled at the end of the trading day at each mutual fund’s net asset value (NAV). As PTFs don’t trade during the day, there will be no trading at bid and ask prices representing a premium or discount to NAV.
Instead of multiple orders being channelled through the FundSERV Inc. transaction system on behalf of each individual client, Invesco will consider each participating IIROC firm to be a single consolidated account.
“The simpler, more streamlined process eliminates unnecessary layers of cost,” Intraligi says. “We have deconstructed the delivery of active money management to create a process that is far more efficient.”
There are no minimum investment requirements and bulk trading is also available. PTFs are available only through the dealers that have signed on with Invesco. Although Intraligi will not disclose their names, he expects the number of firms to grow.
“We are live, but are still in the rollout phase and should be able to offer it to all dealers by mid-November,” Intraligi says. “It’s a new kind of transaction and requires co-operation with the various dealer back offices.”