If, as one fund analyst puts it, the Big Six banks are "feasting on the woes" of foreign and independent fund companies, RBC Asset Management Inc. is the fat man at the head of the table.
The mutual fund arm of Royal Bank of Canada is a force to be reckoned with.
Internal growth has been impressive; the bank and its two million mutual fund accounts represent about 10 per cent of Canada's fund market. RBC has about $54-billion in retail fund assets under management; that's up from about $35-billion five years ago. The only firm bigger is IGM Financial Inc., a Winnipeg holding company with three distinct operating units: Investors Group, Mackenzie Financial Corp. and Counsel Wealth Management Inc.
And sales at RBC are improving. This summer was the bank's best yet with $1.4-billion in long-term net sales, three times higher than 2004.
Here's a look at the key ingredients that have made RBC the fund company to fear.
RBC has a sales force that would fill a hockey rink. There are about 7,500 individuals working in bank branches coast to coast licensed to sell mutual funds. In addition, there are about 1,000 bank advisers pursuing high net worth clients and another 500 "mobile planners," who cold-call customers on the road.
And to the horror of the competition, RBC has forged strong relationships with this country's financial advisers. The advice channel now accounts for 20 per cent to 33 per cent of RBC's monthly fund sales, an achievement unfathomable in the 1990s when independent and foreign fund companies had a monopoly on the financial advice community.
"We have broadened our channels of distribution . . . we have been successful in competing in a totally open environment," said George Lewis, president and chief executive officer of RBC Asset Management.
Unlike some of its bank rivals, RBC made a strategic decision to make fund management a core competency. More than 90 per cent of funds are managed internally. In 2000, the bank restructured its investment team, forcing departments that served global, pension, high net worth and mutual fund channels to share information.
For the first seven months of this year, 45 per cent of RBC funds tracked by Globefund.com were first- or second-quartile performers.
And when the bank has gone outside for investment advice, it has chosen wisely. For example, in 1997, it tapped James O'Shaughnessy of New York's Bear Stearns Asset Management Inc. to run a new Canadian equity fund. Today, the New York-based manager oversees close to $3-billion in four RBC funds.
And finally, RBC has a talent for creating products that address customer needs. In 2003, the bank took a hard look at a mix of well-heeled, long-term clients that were nevertheless an unprofitable customer group. Research found the group were attempting to live on fixed income generated by guaranteed investment certificates.
The research led to the construction of a portfolio of cash-flow funds. Red-hot yield and income-generating funds targeting retiring Canadians are among the bank's best-selling products.
"We've got one hell of an offering," said Daniel Chornous, RBC's chief investment officer. "We've got the right product with strong performance, well presented and through a credible distribution system."
Holland's big fat paycheque
CI Fund Management Inc.'s planned trust conversion will mean a handsome pay day for the Toronto fund company's major shareholders -- including its outspoken chief executive officer Bill Holland.
In a report released last week, National Bank Financial analyst John Aiken forecasts that CI's trust valuation will come in at $29 per unit and boast an annual yield of 7.5 per cent.
The math indicates Mr. Holland's 13.7 million CI shares will be worth close to $400-million after conversion.
Annual distributions on his units, meanwhile, will total about $30-million.
Add to this another $2.4-million -- Mr. Holland's total compensation in fiscal 2004.
The final tally for the chief executive officer? A staggering before-tax annual pay package worth $32.4-million.
Fun with numbers
AGF reports positive net sales in August was the headline on the fund company's release earlier this month. Had the Toronto company finally turned the corner after more than three years of net redemptions in its retail funds? Well, not exactly.
The firm's recent acquisition of ING Investment Management Inc.'s $276-million mutual fund business was added to August net redemptions of about $150-million in AGF's own funds. The result: $123.8-million in net sales.
Meanwhile, Blake Goldring, AGF's president and CEO, is a firm maybe when it comes to income trust conversion. AGF shares enjoyed a nice 12-per-cent rally last Thursday on speculation it may follow rival CI down the trust path.
"Clearly we're going to look at all different things that make sense for shareholders," Mr. Goldring said.
© 2007 The Globe and Mail. All rights reserved.
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