Hyperion Aurora Trust Case

1. Factors in the 1990s
a. Chartered banks began to align themselves with full service brokerage houses and CIBC bid and won Hyperion Trusts (proprietary mutual funds sold by Wood Gundy brokers)
b. Mutual fun business growth required new professional management
c. Brokers wanting more flexibility in the configuration of 5.5% commission from Hyperion and .5% service fee every year thereafter (depends on age ex. Younger wants the upfront commission) → wanted a more flexible pricing structure
2. ?
3. No-Load: you can buy and redeem the mutual fund units/shares at any time without a commission or sales charge. However, some companies such as banks and broker-dealers may charge their own fees for the sale and redemption of third-party mutual funds.
Front End Load: fee is charged up front (charge for shares purchased + sales fee)
Back End Load: fee is charged when you redeem the mutual fund
a. Investor to firm
i. No load: MER → management expense ratio - measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors. ii. FEL: MER iii. BEL: MER + redemption charge (usually % of initial investment – around 4-8%)
b. Investor to broker
i. No load: nothing ii. FEL: sales commission based on % of investment iii. BEL: nothing
c. Firm to broker
i. No load: nothing ii. FEL: annual front service fee as a % of assets based on type of fund iii. BEL: annual back service fee as % of assets based on type of fund + sales commission based on initial investment
4. Possible future developments:
a. Selling funds that would take chances by investing in small-cap