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Innovator adds twists to structure of offerings

NexGen targets 'a better mousetrap'


Jim Hunter is back in the money management business, fronting a new firm that promises to put a competitive twist on the mutual fund.

The fund executive that built Mackenzie Financial Corp. has launched NexGen Financial LP, a Toronto financial services firm that wants to overhaul the way funds are bought, sold and taxed.

"We decided we would try to build a better mousetrap," said Mr. Hunter, NexGen's principal and founder. "It has some extra bells and whistles to make the taxation of funds as efficient as they can be. It segregates that conflict of interest between a taxable investor and a non-taxable investor."

This spring, the fund company plans to offer a slate of 13 fixed-income and equity funds. The firm's Jan. 25 prospectus details a series of innovative strategies:

The funds will have a series of shares, each structured to meet a client's tax planning objectives. A corporate fund group will allow taxable investors to switch between investment classes without triggering a taxable disposition.

The larger the client's account, the lower the fee structure. In addition, a loyalty discount program will reward investors with reduced management fees based on duration and amount invested.

Mr. Hunter is best known for his 13-year stint at the helm of Mackenzie. During his tenure, the company's assets under management grew dramatically thanks in part to a series of new products, including portfolio solutions that bundle together funds in a so-called "wrap" and clone funds that circumvent foreign content limits held in a retirement plan. Mackenzie was sold to Investors Group Inc. for $4.2-billion in 2001 and Mr. Hunter left the company last year.

A handful of Mackenzie veterans have joined him at NexGen, including sales and marketing executive Laurie Munro and senior vice-president Moira Saganski.

In addition, two well-regarded fund managers are on the NexGen team. Robert McWhirter, manager of the Northwest Specialty Innovations Fund, an award-winning science and technology fund, will manage five funds. John Zechner, a veteran manager who has worked at CI Financial Inc. and Elliott & Page Ltd., will oversee a further five funds. The remaining three funds will be managed in-house.

Dan Richards, a Toronto fund sales and marketing consultant, applauded NexGen's innovative approach and the depth of its management team. But building a following among investment advisers and brokers will hinge on returns, he said.

"The determinant for advisers . . . most of the time comes down to track record and performance," Mr. Richards said. "My guess is a lot of investors will say 'Gee, that's interesting' . . . but there will be a significant wait-and-see kind of sentiment."

Tax reform may be a potential "wrench" in NexGen's plans, said Chris Reynolds, president of Investment Planning Counsel Inc. of Mississauga. During the federal election campaign, the Conservative Party promised to eliminate taxes on capital gains that are reinvested within six months.

"If the Conservatives actually get it through, I'm not sure how different it [NexGen] will be from some of the other offerings out there," he said.

Barriers to entry are significant, said Joe Canavan, chairman and chief executive officer of financial advice firm Assante Corp. Canadians buy funds from fewer companies.

Last year, the top 10 fund companies managed 78 per cent of the industry's assets under management, compared with 72 per cent in 2000.

"Any new participant is going to have a challenge," Mr. Canavan said.

"The cost and the importance of regulatory stuff, legal and compliance, technology, distribution costs, financing costs, all that stuff adds up."

© 2007 The Globe and Mail. All rights reserved.

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