February 21, 2000
Two branch plant operations of major U.S. fund complexes were among the top three market-share gainers in Canada in 1999. Fidelity Investments Canada and AIM Funds Management, both of Toronto, ranked second and third in picking up share.
In what was a year of consolidation and slow growth for the struggling Canadian industry, takeover activity accounted for the largest single shift in industry share. C.I. Mutual Funds of Toronto enjoyed the largest gains in standing, surging to ninth place in the IFIC rankings by December 1999, from fifteenth place a year earlier. It picked up an additional 2.28 percent in share to hold $18.6 billion (all figures in $Can) in assets and a 4.77 percent share at year end.
Although C.I. has enjoyed strong sales momentum recently, leading the industry in sales in the fourth quarter, the bulk of its gain in share stemmed from the acquisition of the BPI family of funds. When C.I. bought the family last August, BPI had more than $4 billion in assets.
With assets of $28.4 billion by year-end, Fidelity moved up a rung to fourth place, overtaking the struggling Trimark. Fidelity's market share rose to 7.3 percent by December, up 1.46 percent from a year earlier.
The company led the Canadian industry in net new sales in 1999 for the second year in a row, according to figures released by Fidelity officials.
Although down from 1998's total of $5.4 billion, Fidelity's net new sales (excluding reinvested distributions) last year of $4.9 billion represented nearly 28 percent of the total for the entire industry, the company said.
AIM's Canadian unit, meanwhile, made impressive inroads. Excluding C.I., whose growth rate was driven by acquisition, AIM's asset growth rate of 70.5 percent was by far the highest among the industry's 25 largest firms. With $6.8 billion in assets at year-end, it moved up to 19th place from 21st a year earlier, and picked up 0.52 per cent in share to hold 1.73 percent.
Also among the top gainers in share was AGF Management of Toronto, which maintained its eighth place ranking with $20.1 billion in assets and 5.16 percent in market share, a gain of 0.4 percent. However, AGF's asset growth reflected in part a change in reporting. For the first time last month, the company began including the more than $250 million in fund assets held by AGF Harmony, a wrap program.
Another leader in picking up share was SVC O'Donnell Funds Management of Toronto, with $3.3 billion in assets under management. But, its 0.21 percent gain was takeover-driven. In June 1999, SVC merged with O'Donnell Investment Management, which then had about $1.3 billion in assets.
Although the largest share of industry sales in 1999 were concentrated in a few major firms, a few smaller players managed to make inroads. Leading this group was Synergy Asset Management of Toronto, a load-fund firm headed by Joe Canavan and 40 percent owned by Royal Bank of Canada. Synergy, which offers a diverse range of manager styles, increased its assets by 491.4 percent, the highest in the industry, to reach $436 million.
The worst laggard in market share was Trimark, a onetime favorite of independent brokers and dealers. Its assets rose to $25.5 billion in 1999, a growth rate of only 3.3 percent, compared with 19.3 percent for the $389.7 billion in assets reported by IFIC members as a whole. Overall net new sales of long-term funds for the industry plunged to $12.6 billion in 1999, down 63.4 percent from a year earlier.
Trimark, of Toronto, one of the largest sponsors of Canadian equity funds, has suffered from lack of exposure in its domestic funds to Nortel Networks and BCE, the two major contributors to the benchmark TSE 300 index's total return of 31.7 percent last year. Trimark's market share fell nearly a full percentage point to 6.54 percent in 1999, from 7.48 percent a year earlier.
The other major loser among firms marketing to the broker-dealer channel was AIC of Burlington, Ont., which has also suffered from poor investment returns on its domestic funds. The company's AIC Advantage and AIC Advantage II funds, which invest heavily in financial services stocks, were among the worst performers last year in the Canadian equity category. AIC's share of the market declined to 3.2 percent, down 0.54 percent.
Two large bank fund complexes based in Toronto - Royal Mutual Funds and Bank of Montreal's First Canadian family - had the second and fifth largest losses in share in a year when independent firms dominated. Royal's share fell to 8.17 percent, down 0.61 percent, and First Canadian slipped to a 2.8 percent share, a loss of 0.34 percent during the year.
Investors Group, the company with the most to lose and the perennial market leader, was also a laggard. With $40.7 billion in assets at year-end, Investors' share slipped to 10.43 percent, down 0.37 percent.
Softening the blow considerably for Investors, of Winnipeg, was its release in early February of strong year-end financial results. The company's net income rose by 25.1 percent in 1999 to $235.6 million, its ninth straight year of record earnings.
Although Investors' mutual fund sales declined in 1999, Sanford Riley, Investor's president, said the personal financial-services company showed strong growth in complementary areas such as insurance, mortgages and direct securities.