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Fidelity edges out Mackenzie to set pace in third quarter

Fidelity Investments Canada edged out Mackenzie Financial as the leading gainer in market share in the Canadian fund industry in the third quarter.

Based on statistics released by the Investment Funds Institute of Canada (IFIC), Fidelity picked up 0.29 percent in share to hold 5.41 percent of all IFIC member assets. Mackenzie was second by a narrow margin. It gained 0.28 percent to bring it to 8.05 percent of member assets.

Fidelity has steadily increased its market share this year, gaining a total of 1.24 percent since the beginning of the year. Although it has long been recognized as a leading provider of international product, Fidelity has also made significant gains this year in domestic categories. Its leading fund is its Fidelity Canadian Asset Allocation Fund, which has been the top seller among all mutual funds this year.

The Canadian operation's president, David Denison, said Fidelity has been able to offer to investors and the independent financial advisors who sell Fidelity funds a well diversified product line with solid and consistent performance in core fund categories. Denison attributed Fidelity's success to growing awareness among consumers of the Fidelity brand, as well as improved services, new technology and additional staff.

Despite its impressive gains, Fidelity remains in sixth place overall in the industry, and number four among firms that sell mainly through independent brokers and fund dealers. But it continues to expand its offerings to the Canadian market. During the third quarter it added two new funds to its domestic equity lineup: Fidelity Canadian Balanced Fund and Fidelity Disciplined Equity Fund.

The new balanced fund is being promoted as a conservative alternative to the popular Fidelity Canadian Asset Allocation. Fidelity Disciplined Equity, meanwhile, is designed to take advantage of Fidelity's research depth by combining the stock picks of Fidelity's 12 analysts dedicated to the Canadian market.

Besides placing second in increased market share, Mackenzie in the third quarter regained the position of number one in assets under management of those companies distributing through independent financial advisors. With assets of $23.3 billion (Canadian) as of Sept. 30, Mackenzie drew ahead of arch-rival Trimark Investment Management by less than $100 million.

The most significant contributor to Mackenzie's growth in share was its acquisition of the Cundill group of funds, which bolstered Mackenzie's asset base by about $370 million. Phil Cunningham, president of Mackenzie's fund distribution subsidiary Mackenzie Financial Services, said there has been a "very positive" reaction from investment advisors to the addition of the Cundill funds. Mackenzie announced in October an expanded lineup of Cundill funds, doubling the number of choices to four.

The three other companies with the largest increase in market share during the third quarter are owned by banks. Royal Mutual Funds, second overall and the leading bank fund complex, increased its share by 0.26 percent. Toronto Dominion Bank's and Canadian Imperial Bank of Commerce's fund complexes expanded their shares by 0.19 percent and 0.16 percent respectively. All of the bank-owned firms have benefited from a recent resurgence in the demand for money market funds.

Along with being dethroned as the leader among firms selling to independent advisors, Trimark had by far the worst loss in market share in the third quarter. By the end of September, its share had fallen to 8.02 percent, down 0.51 percent from three months earlier. Because of investor dissatisfaction over lagging performance, Trimark has experienced heavy redemptions among its core Canadian equity, global equity and balanced funds.

However, Trimark's difficulties appear to be easing early in this quarter. Trimark had $180 million in net redemptions in October, down from $227 million in September, says Jade Jemeon, a Trimark spokesperson.

"Our overall redemption number is improved significantly," said Hemeon. She added that investors who fled Trimark funds have missed out on recent improvements in their performance.

AIC suffered the second largest drop in market share- 0.24 percent- in the third quarter. Best known for its heavy investments in volatile fund company stocks, AIC suffered heavy investment losses during the third quarter as its AIC Advantage Fund and AIC Advantage II had three-month losses of 25 percent or more.

Other complexes showing slippage in share included Templeton Management, down 0.21 percent, Investors Group, down 0.18 percent, and Altamira Investment Services, down 0.15 percent.

Balanced funds were the most popular asset category during the third quarter, with $1.05 billion in net sales. That was nearly double the sales of Canadian equity funds, the largest category by assets, which had net sales of $555 million.

The least popular category was mortgage funds, which had $214 million in net redemptions during the third quarter. That brought redemptions in the year to date to $1.1 billion.