VANCOUVER -- It's high time for a reality check on that most saintly of mutual fund companies, Phillips Hager & North.

The PH&N name generates endless hype about low fees, consistent returns and enlightened views and practices. But nobody's that good, are they? On a debunking mission, I visited PH&N's Vancouver head office to find out.

PH&N is well known for having cheap fund management fees, but let's not overplay this company's frugality. My meeting with president and chief executive officer Tom Bradley took place on the 20th floor of a building that looks over Burrard Inlet -- prime waterfront property in a city where real estate prices are beyond insane.

"We try and run lean, but we have nice office space," Mr. Bradley said. "We're not being heroes on that."

There's no getting around the fact that PH&N funds are inexpensive to own, though. The company's large Canadian equity funds have management expense ratios of about 1.18 per cent, whereas the average MER of the 10 largest peer funds by assets is 2.4 per cent.

Is this really such a big deal? If you invested $25,000 for 15 years and grossed 8 per cent annually, a fund with an MER of 1.18 per cent would leave you with $11,283 more than a fund at 2.4 per cent.

All right, let's concede that PH&N funds have low costs. Just try and buy them, though.

A big problem is that PH&N doesn't pay any sales commissions or service fees to investment advisers. This keeps its funds cheap (these fees and commissions account for a full percentage point of the typical equity fund's MER), but it also keeps them on the verboten list of most investment advisers.

Of course, you can always buy PH&N funds straight from the company with zero transaction fees of any kind, or from most discount brokers and fund dealers for a small upfront sales charge. There are also in-house PH&N advisers who work with high-net-worth clients and small retail accounts.

There must be something to this way of doing business because PH&N's asset base grew a highly impressive 55 per cent in the past five years. Especially bountiful were the bear market years of 2000-02.

"We laughed because we were in the Top 10 of net sales, and even in the Top 5 and Top 3 in some months, with no advertising and no big sales force," Mr. Bradley said. "Some of the big firms, which have huge sales forces spending hundreds of millions of dollars, were in net redemptions."

Great, but what about that $25,000 minimum initial investment? How's a regular investor supposed to meet that?

Actually, it's a little easier than you might think. You can spread the $25,000 across the PH&N lineup, so there's no need to worry about sinking that much of your portfolio into a single fund. Also, you can buy in for as little as $1,000 if a parent or spouse is a client. A word of caution: The company is thinking about raising its minimum investment.

Fascinating as all of this might be, the real question about PH&N is the quality of its funds.

Make no mistake, PH&N is mortal. Its global equity fund is half way through its fourth successive year of below-average performance and its U.S. equity fund, once a crown jewel, has been below average for five of the past seven.

"That is our Achilles heel, for sure," Mr. Bradley said. "But we have good people, we have a talented team and we're taking the same approach we do in Canada."

PH&N rules in Canada. Its funds in the Canadian dividend and Canadian bond categories would be on any sentient being's list of the Top 10 funds in the country, and it has a handful of other funds that are no-brainer choices as well for their long-term consistency.

Years ago, you could have criticized PH&N for having as boring a fund lineup as anyone in the industry. But thanks to the addition of a high-yield bond fund, a socially responsible investments fund and a U.S. dividend fund, even that's no longer true.

Praise for PH&N is as constant as the winter rain in Vancouver. Now we know that it's earned.

rcarrick@globeandmail.ca