Investment Q&A

We would not say it is typical to see such a 'miss' but can offer some comments. MREL has a high MER of 1.28%. Over time, this will certainly add up versus 0% for a do-it-yourself portfolio. MREL does not follow a specific index, but it is gauged against one (S&P/TSX Capped REIT Index). Most fund managers do not like to stray away from their benchmark much (this is called index hugging). Thus, they tend to only outperfrom or underperform their index by a small margin. Because the index includes all sorts of REITs, including retail and office, this has likely been a big drag on performance. In addition to index hugging, it is also possible the fund manager's boss actively encouraged them to have more diversification. Again, owning the underperforming subsectors then would have negatively impacted performance. Looking at MREL's holdings, there are some shopping/office REITs, but not really in a significant amount. We would not beat up all active managers based on this one observation. But...a carefully chosen concentrated portfolio will still outperform most managers. The issue of course is that high concentration amplifies losses if one is 'wrong'. MREL owns 41 different securities, so a portfolio of only 6 will always move (up and down) 'more'.