In the mutual fund industry, 2005 was the year of Bill Holland.
If you were talking about costs or consolidation, trusts or taxes some time in the last 12 months, chances are Mr. Holland and CI Financial Inc. were part of the conversation.
In the spring, the fund company's plan to lock in fees paid by unitholders made headlines. The summer months were dominated by the company's audacious bid to swallow British fund giant Amvescap PLC. The fall saw Mr. Holland lash out at the federal government and move forward with plans to convert CI into an income trust. November pitted CI against Quebec's Industrial Alliance group in a battle for Clarington Corp. And until election day on Jan. 23 at least, CI will take on Ottawa again, this time over the goods and services tax.
As Mr. Holland told shareholders in November, CI was "zero for three" in 2005: It dropped its pursuit of both Amvescap and Clarington and shelved its trust plan.
CI investors and unitholders have shrugged off the corporate failings. Company shares rose about 40 per cent in 2005, and 75 per cent of its funds are ranked in the first or second quartile by Morningstar.ca, the Canadian mutual fund investment website.
"Newsmaker of the year," a wary Mr. Holland said of the designation. "Sounds like a jinx, like being on the cover of Time or Sports Illustrated. Hope it does not bring down the humble CI."
Aside from Mr. Holland, there was no shortage of hits and misses across the industry:
The winners . . .
Toronto-Dominion Bank and Royal Bank of Canada: The fund arms of the two big banks continued to grow in 2005 with assets under management up a heady 17 per cent and 20 per cent, respectively. Each had the ideal mix of distribution and in-demand products that appealed to investors.
Phillips Hager & North Investment Management Ltd.: The Vancouver money manager was the destination of choice for do-it-yourself investors. Retail assets under management have climbed 14 per cent so far this year. Management expects the momentum to continue in 2006. There's a new team running the moribund U.S. equity group and the company has waded into income trusts.
Market timers: Five fund companies agreed last winter to distribute $205.6-million to unitholders for permitting rapid, in-and-out trading in mutual funds, a practice that raises costs and hurts the returns of long-term investors. Investors turned a blind eye to the scandal and assets under management at all but one firm -- AIC Ltd. -- climbed in 2005.
. . . and the laggards
Hedge funds: Two high-profile scandals -- Portus Alternative Asset Management Inc. and Norshield Financial Group -- decimated demand for principal-protected notes tied to the asset class. Returns were dismal, too. The S&P Hedge Fund index has returned a poor 2.01 per cent through the end of November.
AIM Funds Management Inc.: The crown jewel of the Amvescap PLC empire evaded the clutches of CI Financial Inc. last summer -- and promptly began losing customers. A strong Canadian dollar, weak foreign markets and limited energy exposure have cut retail assets under management to $44.2-billion, down from a July peak of $45.5-billion.
Small fund companies: Rising regulatory costs meant a tight margin squeeze for many small players with less than $5-billion in assets under management. Relief seems unlikely. The Ontario Securities Commission has a long list of initiatives in the works, including independent review committees, compliance programs, fund manager registration and an update of fund sales practices.
Who to watch in 2006
AGF Management Ltd., AIC Ltd and Fidelity Investments Canada Ltd.: The redemption trio continued to shrink in 2005. All took steps to curb the exit of investment dollars. The betting is Fidelity will be the first to be back in the black in 2006. The Toronto arm of the U.S. fund giant just finished a successful road show and a high-profile advertising campaign is under way.
Charles Guay: The financial wunderkind took the helm of troubled Altamira Investment Services Inc. in May and, to date, has given little indication of his turnaround strategy for the shrinking firm. While investors pour money into the Altamira High-Interest CashPerformer, the company's traditional fund business has shrunk to $3.7-billion, down from a peak of about $6.4-billion in 1997.
Joanne De Laurentiis: The veteran lobbyist for the financial services sector was appointed head of the Investment Funds Institute of Canada in November. The job of unifying the fund industry's vast mix of competing interests rests on her shoulders in 2006.
Whether you were talking about mutual fund costs or industry consolidation, trusts or taxes some time in the last 12 months, chances are Bill Holland and CI Financial Inc. were part of the conversation.
74: NUMBER OF GLOBE AND MAIL STORIES MENTIONING BILL HOLLAND IN 2005
39: PER-CENT GAIN BY CI FINANCIAL SHARES IN 2005
75: PERCENTAGE OF CI FUNDS IN THE FIRST OR SECOND QUARTILE IN 2005
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