The Canadian Investment Funds Standards Committee (CIFSC) announced today that it has approved revisions to the standard categories used by all of its members for their products and services. The revisions are scheduled to take effect as of the monthly reporting period ended May 31, 2005.
The number of CIFSC categories will be reduced to 34, down one from the current 35. One new category will be added, and two categories will be merged into existing categories.
Highlights of the category revisions:
- One new category: Canadian Income Balanced. To qualify for this category, funds must first meet the existing holding requirements of the Canadian Balanced category. In addition, Canadian Income Balanced funds must distribute income at least quarterly and must have a median income yield over a three-year period that exceeds the median for the Canadian balanced category.
- Two categories will be eliminated: Canadian Mortgage will be merged into Canadian Short-Term Bond, which will be renamed Canadian Short-Term Bond and Mortgage. Also, Latin American Equity will be merged into Emerging Markets Equity and continue under that name.
- The income-trust holdings threshold will be raised for the Canadian Income Trust category. The new minimum for income-trust holdings will be 50% of total assets, based on median values over a three-year period. The current minimum is 40%.
- Equity holdings of funds in the four bond categories will be limited to 10% of non-cash assets. Currently, the equity limit is 30% for the Canadian Bond and Canadian Short-Term Bond categories, and 25% for the Foreign Bond and High Yield Bond categories.
- Funds in the Asia ex-Japan category will be required to invest, at a minimum, in three countries in the Asia ex-Japan region. There is currently no such requirement. Also, funds in the Asia ex-Japan category will be allowed to maintain up to 5% exposure in Japanese stocks. Currently, there is no provision for Japanese holdings.
- In the Global Balanced and Asset Allocation category, minor amendments have been made to confirm the current CIFSC practice of allowing foreign exposure to be achieved either through direct holdings of foreign securities, or through the use of derivatives.
“Fund category definitions are always a work in progress for our committee,” said CIFSC chair Rudy Luukko. “In the months to come, we will be reviewing the implications of the pending inclusion of income trusts in the S&P/TSX composite index. Subject to that review, additional amendments to definitions could be made later this year affecting domestic equity and other categories.”
Formed in January 1998, CIFSC is a private sector group whose members include representatives of Canada’s major fund measurement and research firms.
More information on CIFSC and on its activities can be found at:
http://www.cifsc.org/
For comments on the new categories or other matters, the committee can be reached via email athttp://www.cifsc.org/contact/
