A Review of Tangerine Investment Funds: Do They Measure Up?

With more and more Canadians moving towards low-fee investing options, banks and investment companies have had to step up their game, to deliver products that provide the right mix between price and performance.

In this review of Tangerine mutual funds, I’ll take a look at how one of Canada’s leading online banks is filling that need for their customers. Tangerine’s series of index mutual funds have been around for a number of years now, offering a passive investing solution with very low fees. So I wanted to find out how they stack up against other, popular low fee investment vehicles, such as ETFs.

What is an Index Fund?

In case you’re wondering, an index fund is a mutual fund that is designed to track the holdings of a specific stock market index, or indexes, in hopes that it can match the returns of the whole market. The idea being, that over the long run, it’s almost impossible to beat the market, so why try.

Index funds are generally very low cost, due to their passive management, they tend to be tax efficient, and well diversified. All of which make index funds an attractive option for investors of all experience levels.

Introducing Tangerine Investment Funds

The Tangerine Investment Funds lineup is comprised of five index mutual funds, each one aligned to a specific asset allocation. The funds are well diversified, with exposure to Canadian, US, and global markets. Because they are considered passive investments, they carry a much lower management fee (MER) than most actively traded mutual funds. The MER is 1.07% for all Tangerine funds.

Tangerine Investment Funds are comprised of up to four asset classes, which vary in weighting depending on the portfolio. They are, Canadian Bond, Canadian Equity, U.S. equity, and International Equity. Each of these components seeks to replicate an underlying stock market index, hence the term index fund. Here’s a list of the various asset components and their related index:

Canadian Bond – FTSE TMX Canada Universe Bond Index

Canadian Stocks – S&P/TSX 60 Index

U.S. Stocks – S&P 500 Index

International Stocks – MSCI EAFE (Europe, Australasia and FarEast) Index

I should point out that I’ll interchange the words “equities” and “stocks” throughout the article, but know that I’m referring to the same thing. Now that you know which indexes Tangerine funds track, let’s take a closer look at each portfolio.

Tangerine Investment Portfolios: A Closer Look

In January, 2008, Tangerine launched the first three funds in their lineup. In 2011, a 100% stock portfolio was added (Tangerine Equity Growth), and in 2016, Tangerine rounded out their offering with a dividend portfolio, which is also 100% stock. As you read through the portfolio summaries below, it’s important to note that past performance is not an indicator of future returns.

Tangerine Balanced Income Portfolio

Investing primarily in Canadian bonds, the Tangerine’s Balanced Income Portfolio is the most conservative fund in the company’s lineup. But while it carries a 70% Income weighting (Canadian bond), it holds 30% in stocks, giving it some potential for capital growth. The 30% equity allocation is divided evenly between Canadian, U.S., and international equities.

Features:

• Asset allocation: 70% Income / 30% Stocks
• Risk Level: Low to medium
• Fund MER: 1.07%
• Fund Code: INI210
• Assets Under Management (AUM): $372 Million
• Fund Performance since inception: 4.51%
• Launch Date: January 10, 2008.

Tangerine Balanced Portfolio

This fund seeks a balance between income and equity asset classes, with 40% invested in Canadian bonds, and 60% in stocks. The fund achieves global diversification by dividing the equity component between Canadian, U.S. and International stocks (20% each). This also gives the fund increased potential for growth.

Features:

• Asset allocation: 40% Income / 60% Stocks
• Risk Level: Low to medium
• Fund MER: 1.07%
• Fund Code: INI220
• Assets Under Management (AUM): $1.4 Billion
• Fund Performance since inception: 5.17%
• Launch Date: January 10, 2008

Tangerine Balanced Growth Portfolio

With a mix of 25% bonds, versus 75% stocks, the Tangerine Balanced Growth Portfolio leans more towards achieving capital appreciation, while still providing some income. This fund carries a medium risk level and would be ideal for an investor looking to invest for the long term.

Features:

• Asset allocation: 25% Income / 75% Stocks
• Risk Level: Medium
• Fund MER: 1.07%
• Fund Code: INI230
• Assets Under Management (AUM): $1.034 Billion
• Fund Performance since inception: 5.53%
• Launch Date: January 10, 2008

Tangerine Dividend Portfolio

With a launch date of November 2, 2016, the Tangerine Dividend Portfolio is the newest fund in the Tangerine lineup. It’s asset class is 100% stock, with a focus on companies that are expected to pay a dividend. Geographically, fund holdings are spread across Canadian, U.S., and international markets (50%/25%/25%). With the focus on dividend growth, it should come as no surprise that the fund’s Top 10 holdings are dominated by Canadian banks, energy, and telecommunications companies.

Features:

• Asset allocation: 100% stock (dividend eligible)
• Risk Level: Medium
• Fund MER: 1.07%
• Fund Code: INI235
• Assets Under Management (AUM): $129 Million
• Fund Performance since inception: 6.97%
• Launch Date: November 2, 2016

Tangerine Equity Growth Portfolio

This portfolio, made up of 100% stock, is the most aggressive in the Tangerine fund lineup. It’s ideal for investors seeking maximum exposure to equity securities, with a long term growth objective. Most of the fund’s holdings are outside of Canada, with U.S. and international equities comprising almost 70% of the portfolio. And while it bears repeating that past performance is not an indicator of future returns, the increased global exposure is likely a factor in the fund’s 10.40% average annual return since inception (SI).

Features:

• Asset allocation is 100% stock
• Risk Level: Medium to high
• Fund MER: 1.07%
• Fund Code: INI240
• Assets Under Management (AUM): $913 Million
• Fund Performance since inception: 10.40%
• November 21, 2011

Other Options for Index Investing

Tangerine makes passive investing easy with their series of index funds. I like that they cover all of the asset classes (with the exception of safety), and offer a fund that holds dividend paying stocks. But while their MER of 1.07% is favourable to the vast majority of actively traded funds, there are cheaper ways to invest in the broad market. Let’s take a look at a couple of alternatives.

TD e-Series Funds

For years, TD Bank has offered their e-Series index funds at an incredibly low cost. There are five in total: the TD Canadian Bond Index, TD Canadian Index, TD US Index, and the TD International Index fund. You can purchase the funds through a TD branch (there is some additional paperwork required), or you can hold them in any number of discount brokerage accounts (more on that in a moment).

The big advantage to TD’s e-series portfolios is their incredibly low MERs. Ranging between .33% and .51%, they are substantially lower than the Tangerine Investment Fund MERs. TD E-Series funds are all no-load, meaning that you won’t incur any fees to purchase them.

Self-Directed ETF Investing

Self-directed investing, through a discount broker such as Questrade, Virtual Brokers, or any number of big bank offerings, has become increasingly popular in recent years. As investors become more sensitive to high fees, many have begun to invest for themselves, by cutting out the middleman.

Here at MapleMoney, our top choice for online broker is Questrade, in part due to their no-fee Exchange-Traded Fund (ETF) investing. Because ETFs trade on the market like stocks, most discount brokers charge a commission fee upwards of $9.95 on purchases. With Questrade, there is no fee (only when you sell).

As for ETFs, they’ve become a preferred choice for index investors, because of their incredibly low MERs, which can be as low as .04-.08%. Like the Tangerine and TD funds, ETFs follow a broad market index, making them a preferred choice for many investors.

If self-directed investing appeals to you, you can open a Questrade account online, or check out this article on the best discount brokers in Canada, for 2019.

Index Investing with a Robo-Advisor

As with discount brokerages, there are a number of Canadian fintech companies now offering the services of a robo-advisor. Brands, such as Wealthsimple and Nest Wealth, are becoming household names. Robo-advisors offer a passive, index approach, that is almost entirely hands off. After all, not everyone wants to execute their own trades through an online broker.

Our top pick for robo advisor is Wealthsimple. They are Canada’s largest robo-advisor, with more than $400 million in assets under management, and they offer a wide selection of low cost ETFs. When you open a Wealthsimple account through MapleMoney, your first $10,000 invested is free. After that, you will pay an annual fee of .50% for holdings up to $100,000, but with the low MER on the ETFs, you’ll still be paying a lower fee than you would with a Tangerine Investment funds.

Tangerine Investment Funds – Pros and Cons

We’ve covered a lot of information in this article. To help summarize, here’s a list of Tangerine Investment Funds pros and cons.

Pros

• Low MER (1.07%) vs. traditional mutual funds
• No minimum investment amount
• Automatic purchase plan available
• Global diversification
• Automatic rebalancing

Cons

• Higher MERs than TD e-Series funds, and ETFs
• Less control than DIY investing

Tangerine Chequing and Savings

If you are interested in Tangerine’s investment funds, you may want to consider pairing them with a Tangerine chequing or savings account. Both of these accounts have a lot to offer fee conscious consumers, from no-fee banking, to high savings interest rates. Let’s take a closer look.

Tangerine chequing accounts pay interest on every dollar deposited, which is something you won’t find at the big banks. There are no monthly fees, and transactions are unlimited. Your first cheque order is free of charge, and because Tangerine is a subsidiary of Scotiabank, you benefit from having full access to their network of over 3500 ATMs.

Open A Tangerine Chequing Account

The Tangerine savings account offers a high rate of interest with no fees. At the time of this writing, the standard interest rate is 1.15%, but new customers can take advantage of an introductory rate of 2.75% for the first six months. If you prefer to keep your existing chequing account elsewhere, but want the interest that the Tangerine savings account offers, you can set up an automatic transfer from your primary financial institution into the Tangerine savings.

Open A Tangerine Savings Account

Who are Tangerine Investment Funds Best Suited for?

Tangerine Investment funds are a solid choice for investors seeking a reasonably low fee index fund solution, and who want the convenience of investing online. They are certain to appeal to existing Tangerine chequing and savings account holders who prefer to keep everything under one roof.

While I like the Tangerine fund offering, there are better options out there. If you want more control over your investments, a discount brokerage is the way to go, and if low fees is what you’re after, then I would recommend either the TD E-Series for an index fund solution, or better yet, an ETF portfolio, through Wealthsimple, or Questrade. When it all boils down, the most important thing is that you’re investing. How you do it, is up to you.