TORONTO - Amid weak sales, the only large shift in market share in the Canadian fund industry in the third quarter came through acquisition. The takeover of BPI Financial of Toronto lifted C.I. Fund Management, also of Toronto, to tenth in the industry, up from 13th at mid-year, according to the Investment Funds Institute of Canada.
As of Sept. 30, the merger of the two Toronto-based firms left C.I. with $14.5 billion (all figures in Canadian dollars) in assets, up from $9.8 billion three months earlier. Most of that growth, or more than $4 billion, was directly attributable to the BPI deal.
The C.I. acquisition was aimed at creating greater economies of scale and operating efficiencies. A look at recent sales trends suggests that this is a timely strategy in the dreary Canadian industry climate.
Overall, sales have plummeted from year earlier levels. Through the first nine months of this year, net sales of institute member firms totaled $16.8 billion and were down 45.3 per cent from year earlier levels.
In September, the most recent month for which results have been released, net new sales of $249 million were down 54.3 per cent from the same month a year earlier. (The net new sales figures exclude reinvested distributions.)
However, there have been some sharp divergences in sales trends among different categories of funds, both in the most recent month and in the third quarter overall. Foreign funds "continue to attract the most attention as more fund companies offer Canadians alternatives to the restrictive 20 per cent foreign property rule for registered retirement accounts," said Tom Hockin, president of the institute.
Derivatives-based foreign funds, which offer full eligibility for tax registered plans while delivering foreign exposure, have been the driving force behind the industry-leading sales of foreign equities.
Foreign equities had $1.9 billion in net new sales, and U.S. equities another $502 million. Foreign bond funds, chipping in another $230 million, ranked third.
Since net new sales of all funds, excluding money market funds, amounted to only $777 million during the same three month period, the inflows into foreign funds came at the expense of domestic categories.
The largest outflows, totaling $1.27 billion, were from Canadian equity funds. Dividend funds and mortgage funds had redemptions of $244 million and $242 million respectively.
The runner-up gainer to C.I. was Fidelity Investments Canada, which picked up 0.13 percent in market share during the third quarter to reach 6.61 percent. Fidelity ranks fifth among all firms, unchanged from June 30, but it continued to move closer to Trimark Investment Management, which is the fourth largest.
Fidelity ended the third quarter with $23.5 billion in assets, a little more than $1 billion behind Trimark. Three months earlier, the gap between the two Toronto-based firms was $1.7 billion.
Attempting to hold onto its position, Trimark announced in late October a major expansion of its offerings. It has added eight new international funds, including four derivatives-based funds fully eligible for retirement plans, bringing its total fund lineup to 28.
The company has been focusing on strengthening both its Canadian equity and foreign investment teams, said Brad Badeau, president of Trimark.
"In order to attract talent, we have to have product for them to manage," said Badeau. He added that the firm feels confident that it has the products to meet the needs of most Canadian investors.
Trimark has been suffering from heavy redemptions, though company officials say they appear to be easing. Still, the firm continued to slip in the third quarter. Its market share of 6.89 percent as of Sept. 30 was down 0.07 percent from three months earlier.