Flow Through Share Examples!

In my article “How Flow Through Shares Work“, I didn’t give many examples of actual flow through shares or mutual funds that hold them.

A reader, “Chewy” has left a recent comment on the research that he has done in the field, and he has come up with a list of his favorite mutual funds that hold flow through investment vehicles.

To briefly summarize, here are the top 3 picks based on “Chewy’s” research:

1. CMP Resource LP
2. Canada Dominion Resource LP
3. Mavrix Explorer LP

Note that past performance is not indicative of future performance.  In addition, the “top picks” mentioned in this post are NOT recommendations to buy.

Below is his comment:

I too have been doing a lot of research on Flow Through Shares. I made some interesting finds.

I created a spreadsheet and tried to compare the Management, Performance, and Expenses of these Limited Partnerships (LP’s). I was able to compare the Prospectus of 10 LP’s that I downloaded from TD’s Webbroker Initial Offerings site.

The problem I found is that when these LP’s record their performance they always use after tax dollars. So I compared their Closing Net Asset Value Per Unit at the time of rollover to their Original Unit price. I also looked at the number of years that the LP had Offerings and the number of times that Net Asset Value per Unit was greater than the Original Unit Price.

What I found is that out of the 10 LP’s I compared, only 3 LP’s had a Net Asset Value per Unit that was greater than the Original Unit Price before the tax deductions on a offering over offering basis. Some of them, like Sentry Select NCE LP’s only had 1 out of 17 offerings that had been positive. Creststreet LP had 2 out of 10 offerings that were positive. 2 LP’s that you might want to think twice about, before giving them your money.

There were 2 that stood out from the rest. CMP Resource LP and Canada Dominion Resource LP are by far the best when comparing Performance, Expenses and Management. Both of these LP’s are now owned by DMP Ltd. Both are also managed buy Dynamic Funds which is also owned by DMP Ltd.

CMP Resource LP has the best performance record. They had 9 out of 10 offerings that had been positive. Their Offerings are normally $1000 per Unit with a minimum of $5000 buy in. But their Average Asset Value per Unit on those 10 offerings was $1242.74. That works out to be a 24% return on your money before taxes. I calculated their Average After-Tax Rate of Return on Transfer Date ends up being 95%.

Canada Dominion Resource LP would be my second choice based on their consistency and management. They had 11 out of 16 offerings that had been positive. They are also owned and managed buy the same companies as CMP. Dynamic Funds is listed as a top performer on TD’s Webbroker Fund Selector, and they have one a number of Lipper Awards for Consistency and Performance.

My Third Choice would be Mavrix Explorer LP. They had 5 out 9 offerings that were positive. They are in the lower half of the group in Expenses.

It’s important to realize that if you are investing in one of these LP’s, you are most likely going to lose money. But with the Tax deductions you may come out ahead. If you are not comfortable with the risk, then I would say, just pay your tax bill.

Never Invest in something just because you are looking for a tax deduction. You should only Invest in something that makes sense to you and that you have a good chance that you are going to make money.

Disclaimer: This article is not meant to be recommendations