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CI star defects to upstart

Money not the issue, Shannon says

TORONTO -- Demonstrating a stealth rarely seen in the staid Canadian mutual fund industry, superstar fund manager Kim Shannon slipped away from Bill Holland's CI Financial Income Fund and into the fold of an industry upstart yesterday.

Ms. Shannon, the award-winning manager of $7.9-billion in CI funds, is joining Brandes Investment Partners & Co., a fund company one-tenth the size of CI. Ms. Shannon is a value-driven manager and prominent player in the Toronto financial community.

"I have tremendous respect for the people at CI. I'm feeling a little bit odd today because it is hard to go and part with friends," Ms. Shannon said yesterday.

"There was no specific issue that led to this. It's just an interesting challenge and opportunity that led to the strategic alliance with Brandes."

Sionna Investment Managers Inc., a company controlled by the 48-year-old Ms. Shannon, has formed a "retail alliance" with Brandes, and together will launch a suite of equity funds, the two companies said last night. The new partnership severs a 10-year relationship between Ms. Shannon and CI, an alliance that saw both firms grow spectacularly and win critical acclaim.

In November, Ms. Shannon was named Morningstar Fund Manager of the Year at the Canadian Investment Awards. In her acceptance speech, she thanked the outspoken Mr. Holland for his support.

Mr. Holland, CI Financial's chief executive officer, learned of Ms. Shannon's defection only when contacted by the press late yesterday.

"We're disappointed, but we believe that we have the resources in spades to care for the money that clients have entrusted to us," Mr. Holland said. "We've got the best lineup of Canadian fund managers in the business, a lineup that resembles the Edmonton Oilers of the eighties."

Rival fund managers suggested Ms. Shannon may have jumped to Brandes for more money, though one industry headhunter said Ms. Shannon was likely among the country's best-paid portfolio managers.

"CI is known for not paying its portfolio managers top dollar," one veteran fund manager said. "The company's focus is on marketing, not on making stars of its managers."

And that marketing is about to get more difficult. Ms. Shannon was slated to speak to about 600 financial advisers at three CI meetings later this week.

Ms. Shannon said money had little to do with her decision. Sionna was paid based on a percentage of CI assets under management and the Brandes partnership is a "step back financially," she said.

Despite Mr. Holland's assurances, industry sources described Ms. Shannon's exit as a setback for CI.

Dan Richards, a fund marketing consultant, described her exit as "a bit of a hiccup" for CI and "a very big win" for Brandes. Ms. Shannon has a strong following among financial advisers and inevitably, some money will follow her to Brandes, he said.

Sionna, Ms. Shannon's Toronto investment firm, manages billions in mutual fund assets for CI, including the $5.1-billion CI Canadian Investment Fund. Assets managed by Sionna represent more than 16 per cent of CI's $47.8-billion mutual fund and segregated fund assets under management.

The strategic alliance is a minor coup for Brandes. The firm is best-known as a global investment manager with limited strength managing Canadian equity funds. The Brandes Canadian Equity Fund, its sole domestic stock offering, has a slender $124.5-million in assets under management while Brandes Global Equity is a whopping $2.8-billion in size.

The Sionna partnership marks the second time Brandes has thumbed its nose at a bigger industry player. In 2002, Brandes announced it was parting ways with partner AGF Funds Inc. and launching its own Canadian operations. For the previous eight years, Brandes had managed the well-regarded AGF International Value fund. The divorce was bitter, and industry sources claim the separation accelerated the steady decline of AGF's fortunes.

The combination of Brandes and Sionna creates "a powerful proposition" for investors and advisers, Brandes president and CEO Oliver Murray said yesterday.

"We look forward to speaking with financial advisers and showing them what we have created here," he said.

Kim Shannon at a glance

Principal shareholder of Sionna Investment Managers Inc., one of Canada's top-performing value fund managers. Sionna, Gaelic for Shannon, was founded in 2002.

Manager of the CI Canadian Investment Fund -- Canada's oldest equity mutual fund -- since 1995.

Named Morningstar Fund Manager of the Year at the 2OO5 Canadian Investment Awards.

Twenty-three years of investment management experience, including as chief investment officer at both Merrill Lynch Canada and Mercury Asset Management (Canada).

Holds the chartered financial analyst designation and several degrees, including an MBA from the University of Toronto.

© 2007 The Globe and Mail. All rights reserved.

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