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Fidelity breaks into top five in Canadian market share

Thanks to industry leading gains in market share over the past year, Fidelity Investments Canada has moved up to fifth place in assets among Canadian fund complexes. That is up three rungs from a year earlier. If present trends continue, there is a good chance Fidelity will climb higher in 1999.

Fidelity Canada, the wholly owned subsidiary of its U.S. parent, based in Boston, saw its market share among member firms of the Investment Funds Institute of Canada (IFIC) soar in 1998 to 5.84 percent, up 1.67 percent from a year earlier.

During a volatile year in the financial markets, Fidelity Canada continued to benefit from the strength of its name brand, said Paul Howard, a Fidelity spokesperson. One of the industry's largest advertisers, Fidelity has emphasized its size, strength and experience. Howard said sales have also received a boost through wrap accounts and insurance products that use Fidelity products as their underlying funds.

"We've seen quite a proliferation of these types of alliances," he said.

Fidelity ended the year with $19.1 billion (Canadian) under management, up from $11.8 billion a year earlier. During the year, it overtook Templeton Management, Toronto Dominion Bank's TD Asset Management and AGF Management.

Fidelity officials have said their long term goal is to be the largest fund complex in Canada. Despite Fidelity Canada's $7.3 billion gain in assets during the year, however, the top spot remains distant. Investors Group, the perennial Canadian market leader, with $35.3 billion in assets gathered by its proprietary sales force, remains more than $16 billion ahead of Fidelity.

But with its strong sales momentum, Fidelity has a chance this year of at least climbing to fourth place, the position currently held by the $24.4 billion Trimark Investment Management. Remarkably, for a company that has long been regarded as having one of the Canadian industry's strongest brand names, Trimark has been losing market share at an even faster rate than Fidelity has been gaining share.

In 1998, Trimark's market share plunged to 7.48 percent, down 2.15 percent. Mainly because of redemptions of its diversified Canadian equity funds which have performed indifferently, Trimark's assets fell by 10.4 percent during the year.

By comparison, IFIC member assets increased by an average of 15.4 percent during the year. Fidelity's assets, meanwhile, soared 61.5 percent. Fidelity has closed the gap between itself and Trimark to $5.4 billion, or about $10 billion less than a year earlier.

More firmly entrenched in their rankings are Royal Mutual Funds, sponsored by the country's largest bank, in second place, and Mackenzie Financial, the largest complex serving independent brokers and dealers, in third place.

Royal, with $28.7 billion in assets at the end of December, had asset growth of 15.1 percent last year, only slightly less than the industry as a whole. Mackenzie finished the year with $26 billion in assets and was the fourth largest gainer in market share. It currently manages 7.95 percent of IFIC assets, up 0.44 percent from a year earlier.

Overall, bank fund complex CIBC Securities was the runner-up to Fidelity in gaining share. It ended 1998 with $17.5 billion in assets and a 5.35 percent share, up $5.9 billion or 1.27 percent from a year earlier. But, a reorganization by CIBC in which the 11 Canadian Imperial pooled-funds became mutual funds sold by prospectus, accounted for $4 billion of the fund complex's asset growth.

After excluding the reorganization, CIBC's mutual fund operation had asset growth that was slightly above the industry average.

"We still had a relatively good year," said Larry Tomei, CIBC's manager of mutual funds. He cited improved performance of its actively-managed funds, industry leading assets in index funds and the growing popularity of its portfolio rebalancing services.

Other fund companies that gained share included AIC and Global Strategy, both sold by independent advisors. AIC's assets surged by 66.5 percent to end the year at $12.2 billion. That boosted its market share to 5.35 percent, up 1.15 percent during the year. AIC currently ranks tenth in the industry, up from twelfth a year earlier. Global Strategy over the year grew to $6.6 billion in assets and a 2.02 percent share, up 0.30 percent from 1997.

Global Strategy edged out AIM Funds Management in gaining share, but AIM's gain of 0.29 percent reflects mainly the consolidated reporting of its two fund families, including the former GT Global funds, which previously reported separately to IFIC.

The performance of U.S.-owned Scudder Canada Investor Services, which reported a 101.5 percent gain in assets in 1998, was also noteworthy. However, after three years of operation and heavy spending on advertising, Scudder's assets at year end were still a modest $598 million.

Other laggards besides Trimark included Altamira Investment Services, an independent direct seller partly owned by TA Associates of Boston. Altamira's market share declined to 1.38 percent, down 0.55 percent for the year.

To turn its sales around, Altamira has introduced new products and services including low- fee index funds, a specialty fund focusing on Internet business and a new asset allocation service. The company is also spending heavily on a TV ad campaign in which Gordon Cheesbrough, the company's president and ceo, appears.