Corporate Class Funds

For mutual fund investors, it's not just size that matters – structure matters, too

Maximize profits and minimize taxes

Structure counts when you redeem. If you're invested in a traditional mutual fund outside your registered account and want to sell units of the fund that have increased in value since you bought them, you could face a capital-gains tax. That's because a traditional mutual fund is structured as a trust, and its tax efficiencies are advantageous to the fund company, rather than to you, the investor.

But if you had instead invested in corporate class funds, you might have paid less tax in the end. That's because a corporate class fund is designed as a holding corporation, set up by a fund company to invest in a group of mutual funds. The result is that corporate class funds tend to pay out distributions that are more tax efficient to the investor.

Plus, as long as your money remains invested in a corporate class fund, the tax payable on any gains is deferred. This allows your money to grow faster and more efficiently through the power of compounding.

Corporate class funds are generally used by investors who have reached their contribution limits in tax-free savings accounts and registered retirement savings plans. The appeal of this fund class is that it represents yet another option for tax-efficient investing.

When choosing a corporate class fund family, look for one with a wide variety of available funds. Ideally, it should include Canadian, U.S., global equity, sector and money market funds, as well as offering differing management styles.
For the right investor, corporate class funds can be a great way to make your portfolio more tax efficient. And, over the long term, tax-efficient investing can have a positive impact on the value of your portfolio.

Important Tax Change Notification

As of January 1, 2017, Corporate Class Funds have lost some of their tax advantage. The 2016 Federal Budget told us that exchanging units of one corporate-class fund for another would no longer be tax-deferred. This change has eliminated the ability of investors to switch between funds in corporate class investments without paying capital gains tax.

Here's where we can help!

We work with you to develop a comprehensive financial plan designed to help you reach your goals. Then we help you decide on the best options for investing and building your portfolio.

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Are you considering adding mutual funds to your financial portfolio? We encourage you to contact us to arrange a no-obligation meeting to discuss your options.

Need Advice?

Are you considering adding mutual funds to your financial portfolio? We encourage you to contact us to arrange a no-obligation meeting to discuss your options.

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