Savings Fund

• Overview
• Manager
• Performance
• Holdings
• Commentary

October 2008

Short-term interest rates remained stable in the third quarter, with the Bank of Canada’s key overnight lending rate unchanged at 3.0%.  The central bank feels that the current level is “appropriately accommodative” in the face of weaker global economic growth but strong domestic demand.  The policymakers also feel that financial conditions at home remain significantly better than those in most other major global economies.  This means that we probably won’t see a dramatic change in policy anytime soon and short-term rates are likely to hover around current levels. 

At the end of September, the pre-fee yield of the Savings Fund stood at 2.5%.  The post-fee yield of the fund varies for investors thanks to our Fee Reduction Program. 

The fund provided a return of 0.6% in the quarter, and has gained 3.3% over the past year.    

The manager, Connor, Clark & Lunn, continues to focus the fund’s assets in high quality securities.  During the quarter, they reduced the fund’s modest exposure to bank-sponsored ABCP and corporate paper and built-up its weighting in provincial T-bills.

There are no concerns about the securities in the fund as the manager doesn’t needlessly stretch for yield.  As we reported last quarter, until the Bank of Canada starts raising short-term interest rates, investors should continue to expect a period of low yields on money market investments.