By Scott Ronalds

As a kid, my family and I used to go on a summer holiday every year to Savary Island (a small island about 200 km north of Vancouver). It’s a bit of a hidden treasure, with white sand beaches, warm waters and an abundance of shellfish. There was no electricity, few cars and fewer rules (don’t bury your sister and be home for dinner). We loved it.

I was back on the Island this summer and few things have changed. The tennis court still has a shoddy wood floor, there’s still no electricity (save the odd generator) and the water is just as welcoming. There are a few more boats and cars now though, which gets the old guard steaming, but we won’t go there.

Surprisingly, the owner of the cabin we used to rent dropped by one day with something we left behind 30 years ago – a copy of Canadian Business magazine from June 1981. It cost $2 and had my dad’s name and office address on the front. I took it to the beach one afternoon to flash back to what was going on in the Canadian business world when I was seven years old and the only thing that mattered was how big a fort my gang could build on the beach before the tide swept it away. Aside from some laughable ads from the top word processors of the day, an article on money market funds caught my eye.

The piece led off by noting that most Canadians were investing their spare cash in bank accounts or GICs: “Both these vehicles are safe and now yield a generous, though by no means princely, 13% to 15% a year.” Ah, the good old days! The author goes on to pitch the virtues of money market funds, “where you can earn 16% or more on your money … it’s a game that takes some getting used to but the rewards can be substantial.”

At the time, there were only two such funds in Canada (compared to 99 in the U.S.), the AGF Money Market Fund and Guardian Capital Money Market Fund. The former was yielding 16.7% and the latter 16.4% at the time of writing. (And to think I was wasting my allowance on Dr. Pepper and Bazooka Joe) Neither fund, however, had caught on with investors. The author suggested the major factor holding the funds back was that “Canadians don’t share the dis-satisfaction many US investors have with banks and trusts ... to most people, it seems a lot easier to just throw their money in the bank.”

Today, there are over 300 money market funds in Canada, most of which are yielding 1% or less (after fees). Further, the banks now have a disproportionately large share of the overall mutual fund industry. Canadians still love their banks. With their huge branch network and distribution channels, many investors still feel it’s a lot easier to turn to the banks for their savings and investing needs.

The more things change, the more they stay the same.

As summer winds down, I find myself longing for a Dr. Pepper and some of those generous, but by no means princely, 13-15% returns.