Putnam Investments of Boston has struck an alliance with a Toronto-based money manager to enable it to pick up the pace of its expansion in the Canadian market.
Putnam has agreed to establish co-branded investment funds for institutional clients of Sceptre Investment Counsel, and will acquire a five percent non-voting stake in the company, which is listed on the Toronto Stock Exchange. In addition, Putnam will become the sub-adviser, as of Oct. 1, for Sceptre's existing U.S. and international pooled funds, which have $1 billion in assets under management.
"We really feel like we needed a partner on the ground to take it to the next level," said John Brown, Putnam's managing director and head of institutional management. With a firm of Sceptre's caliber to help in marketing and client service, Putnam will be able to build on its existing base in Canada, he said.
Putnam currently manages $2 billion in assets in Canada for 30 institutional clients, and will continue to maintain these relationships. That represents a tiny sliver of Putnam's $400 billion under management worldwide, which includes about $100 billion managed for more than 600 institutional clients.
Under the agreement, Sceptre will become the exclusive marketing agent for all of Putnam's global, international and U.S. products for new institutional clients in Canada. Currently, products covered under the agreement consist of five pooled funds.
Putnam's current clients include Great-West Life Assurance of Winnipeg, for which it manages insured investment funds that are available to individuals. Through its alliance with Sceptre, Putnam expects to become a greater presence in the retail market.
Putnam will take over on Oct. 1 as the sub-adviser to Sceptre's global equity fund for retail investors, and the firm hopes to sub-advise other mutual funds for Sceptre, said Brown.
"That's a great way to get our toe in the water in the Canadian retail marketplace," an area about which Putnam knows little, said Brown. "We're hoping to learn quite a bit from Sceptre over the next 12 to 18 months before we make any other strategic decisions."
Sceptre, which currently has $10.9 billion in assets under management, was formed in 1955 and has been a public company since 1986. Along with its core institutional business, it has a personal asset management group that provides pooled funds and segregated account management for high-net-worth individuals. Its seven no-load retail mutual funds, with assets of about $350 million, are a small part of its total operation.
The alliance with Putnam is consistent with Sceptre's goal of enhancing its investment management capabilities and broadening its product offerings, said William Malouin, president and CEO of Sceptre. Recent increases in the limits on foreign investments by Canadian pension plans and individual registered plans have accelerated clients' demand for greater choice in global investment products, he said.
"To address these needs, it was essential that we strike a relationship with a global leader like Putnam," he said. "We feel that Putnam is a good strategic fit for Sceptre. We have a similar investment style, philosophy and length of experience in our respective markets."
The pooled funds to be advised by Putnam will be marketed under both the Sceptre and Putnam names, Malouin said. Sceptre employs a total of 100 employees in Toronto and its branch office in Vancouver.
The deal enables Sceptre, which is controlled by its senior managers, to remain independent, said Malouin. But Putnam's five percent stake in Sceptre, for which it will pay close to $9 million, is likely to grow.
"We are talking about a further five percent over the next three years," said Malouin.
The share purchase was subject to regulatory approval, and scheduled to be completed by the end of September. Putnam will purchase its initial stake from shareholders affiliated with Sceptre, so there will be no dilution of the company's equity. In addition to Putnam's gaining an equity stake, its senior managing director, Stephen Spiegel, will be appointed to Sceptre's board of directors.