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Altamira maintains decidedly low profile

Industry-shaking firm now a shadow of its former self, KEITH DAMSELL writes


What the heck happened to Altamira Investment Services Inc.? The aggressive fund firm that shook up the industry in the 1990s now appears to be a pale shadow of its former self, slowly bleeding assets in a quiet corner of National Bank of Canada.

The company's assets under management have shrunk to about $3.8-billion, down from a peak of about $6.4-billion in 1997.

"At one time, this was a company firing on all cylinders," said Rudy Luukko, investment funds editor with "Nowadays, you have to scratch your head. Who is over at Altamira?"

About 10 years ago, Altamira was the envy of the industry. The resource sector made fund manager Frank Mersch a star while managers Will Sutherland and Robert Marcus racked up strong returns for the company's bond and income funds. The company's direct-sales approach meant a pittance in fees for the financial advice community, which was mortified by Altamira's low fee structure.

The stock market's collapse in 2000 marked the end of the company's winning streak. The cycle of redemptions began, a downturn that led to the company's sale to National Bank for $472-million in 2002. The deal made sense and brought together the bank's value-oriented fund management style with Altamira's growth team.

A long list of key managers left Altamira in the deal's aftermath, including Mr. Marcus and tech guru Ian Ainsworth. The company has kept a decidedly low profile and new managers, including a large cadre from National's Natcan Investment Management Inc., are taking a more moderate approach to investing.

Fund performance has been mediocre in recent years. The marquee Altamira Equity Fund has returned a respectable 15 per cent annually since Virginia Wai-Ping took over the reins two years ago. Nevertheless, the gains lag the Canadian equity fund average of 17.1 per cent during the same period.

The problem is that the direct sales model demands enticing returns. Direct sales at Phillips Hager & North Investment Management Ltd. and Sprott Asset Management Inc. are strong because investors trust each company's long track record of solid fund management, said Dan Hallett, a Windsor, Ont.-based fund analyst. Altamira is "missing that consistency," he said.

Since the National Bank deal, Altamira's assets under management have slumped 14 per cent. In contrast, the recovering fund sector's asset base has grown by about 25 per cent. February marks Altamira's 13th consecutive month of net redemptions and the company has lost $125-million in business this registered retirement savings plan season.

Greg Reed, Altamira's president and chief executive officer, is considered a bright executive but he must wear two hats -- he also oversees the bank's branch operations west of Quebec.

Altamira is taking the first steps to address the redemption issue. A handful of new funds and products have been launched in recent months, including December's Altamira High-Interest CashPerformer, a deposit product that has already pulled in $250-million in new investment. Future plans include the roll-out of new investment service products this spring.

Stay tuned.

Lawyers score on RRSP changes

Lawyers will be the first beneficiaries of the proposed end of the 30-per-cent cap on foreign content held in RRSPs.

If the federal budget passes as expected, thousands of mutual funds will be affected. Clone funds that duplicate the returns of foreign asset funds will be no more. Meanwhile, the investment objectives of funds that currently hold foreign content are likely to be overhauled.

It all means some serious hourly billing for securities lawyers. The prospectus of each fund must be rewritten and approved by regulators. Meetings must be called for unit holders to approve the many changes coming.

Expect fund companies to request a flurry of exemption orders this year to speed up the process -- and reduce mounting legal bills.

Former Assante adviser sued

A group of 24 small investors in British Columbia has filed a lawsuit against a former Assante Corp. financial adviser.

The Courtenay, B.C.-area investors claim Bryan Orr mismanaged their savings in mutual funds from the mid-1990s through 2002. Mr. Orr failed to conduct proper risk analysis of his clients and misinformed clients on the state of their finances, alleges the November, 2003, statement of claim filed with the Supreme Court of B.C.

The investors claim Assante is liable too, alleging the Toronto company had a duty to ensure that Mr. Orr was qualified and followed regulatory guidelines.

Mr. Orr denies all allegations and claims that the investors were well aware of the financial risks they were taking. "Loss or damages . . . were the unavoidable result of market conditions over which Orr had no control," said his January, 2004, statement of defence. Mr. Orr no longer works at Assante.

In its own statement of defence, Assante claims Mr. Orr was an independent contractor and, as a result, it is not liable for his actions. The company wants to be excluded from the action.

The Courtenay action, expected to go to court in February of next year, is the second lawsuit alleging past indiscretions by an Assante adviser. In a wrongful dismissal suit filed in Saskatoon last year, former employee Kent Shirley alleged that adviser Brian Mallard overbilled clients and misrepresented fees. Mr. Mallard denied the charges, and in a counter-claim alleged Mr. Shirley was a poor employee. It's believed Mr. Shirley's allegations prompted the Ontario Securities Commission to review Assante's past sales practices.

CI Fund Management Inc. bought Assante in 2003 and it's a safe bet the lawsuits are a frustration to the new management. Assante's senior ranks include president and chief executive officer Joe Canavan, a well-respected industry veteran, and James Ross, vice-president of risk management.

© 2007 The Globe and Mail. All rights reserved.

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