Is anyone familiar with corporate class funds? They are quit popular here in Canada, not sure how popular they are in the states or other parts of the world.
What’s your view? How can you leverage them when building a client’s/your portfolio?
the feds got rid of this about 2 hours before you created this thread.
http://www.advisor.ca/tax/tax-news/bad-news-for-business-owners-and-corporate-class-investors-203009
That should help with what they are and when they will cease being in existance.
^^LOL.
Looks like I’m gonna be busy.
Holly! I actually created this thread and boom the budget happened. My firm doesn’t have a corporate class structure in place so it won’t affect us that much.
What’s your view on what the feds did??
Never heard of them before today. But my first question is say you buy $1000 of Class A. With cap gains and dividends the value goes to $1200. You then roll your $1200 into Class B. and so on. I guess the main appeal is you’re effectively deferring the capital gains tax until you sell out of the whole fund and can switch strategies in the interim? Correct?
Sounds to me like a loophole that should likely have never existed in the first place and the revenue seeking Libs are more than happy to close said loophole…
Not quite right! In the corporate class structure, you can switch from a Canadian equity to an emerging market fund for example, without trigerring a taxation. The Liberals are now giving people until Sep 30, 2016 to rebalance as they wish, any fund switches after that would trigger a capital gain. You can still switch from Class A (with trailer) to Class F (no trailer, for fee based advisors) for example, with no tax consequences.
Well I guess they needed money from somewhere to fund those infrastructure projects they were talking about…
only downside is that corporate class costs more. generally 0.1%-0.3% compared to the same fund in a regular structure. so it means less revenue for the issuer, most of which was eaten up by legal and admin costs anyway, and faster realization of gains on a large chunk of capital. though i’m sure people will just avoid switching in the future.
Good point! There are however a few firms that have a large AUM in corporate class, such as CI, AGF or Mackenzie. I know several advisors that would use CI because they have a superior corporate class structure, now, that motive is not there anymore, and they can use any fund company.
Anyways, this only represents 10% of all mutual fund assets in Canada, and time will tell if clients/asset managers will be affected by this federal budget decision.
Never heard of em