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TD's team targets top of the heap

Fund boss Tim Pinnington has proposed fixed administration fees in the race to overtake IGM as Canada's top seller, KEITH DAMSELL writes

MUTUAL FUNDS REPORTER: With a file from Andrew Willis

Tim Pinnington's climb up the corporate ladder of Toronto-Dominion Bank took a strange turn a year ago.

The executive was called back from U.S. operations to run the bank's TD Mutual Funds unit. A mix of top-performing funds and a crack sales team had made TD one of the country's most successful fund operators.

It's akin to handing a lucky kid the keys to a new Ferrari: Take it out for a spin -- but don't scratch the paint! "Here it is, don't screw it up," said the 42-year-old Mr. Pinnington. "We had just won fund company of the year. There was nowhere to go but down."

Mr. Pinnington, president of fund operations, has spent much of the past year learning and planning. In recent weeks, he has unveiled a strategy that, if successful, will boost TD's fund asset base from a fourth place $47.3-billion to the No. 1 ranking currently held by IGM Financial Inc. "The mission is to become the No. 1 selling mutual fund company in Canada," he said.

Earlier this month, TD introduced an innovative plan to fix pricing for its suite of mutual funds. Typically, fund management fees are set at fixed percentage amounts, while operating expenses vary. TD proposes to pay the operating expenses itself and, instead, charge investors a fixed administration fee. This would provide investors with greater certainty over fund expenses, which are the second-largest component of a fund's annual management expense ratio. It's a competitive move that could lower fees. Unit holders will vote on the plan on Dec. 7.

Rival RBC Asset Management Inc., the mutual fund arm of Royal Bank of Canada and the country's biggest bank fund manager, is in TD's sites. According to Mr. Pinnington, TD trumps RBC when it comes to fund sales through independent advice channels, and now TD will bulk up the expertise of its in-house team. Next month, the bank will unveil a new sales platform for its team of about 500 advisers. A new computer system will be introduced; training in sales and financial planning will be honed.

For Mr. Pinnington, it's all about sharpening the skills of TD's formidable crew, a group that includes top-ranked funds managed by Satish Rai and Doug Warwick.

"The product kind of sells itself," he said. "Sometimes people say 'Why are you successful?' And I say 'I feel like Steven Spielberg's film distributor.' Am I a really good distributor? Well, it helps that I've got Steven Spielberg."

Bubis pegged for CI post

CI Financial Income Fund is expected to appoint Daniel Bubis the manager of the $5.1-billion CI Canadian Investment Fund this week.

Mr. Bubis, the little-known head of Tetrem Capital Partners Ltd., will replace Kim Shannon, the star manager who ended her ties with CI last week. Winnipeg-based Tetrem was founded two years ago by a group of industry veterans from Assante Wealth Management Ltd. The Tetrem team now manages money for Assante, including pools of funds held in Assante's successful fund wrap product called Institutional Managed portfolios.

Tetrem's returns are nothing to sneeze at. The firm's $1.4-billion United-Canadian Equity Value Pool posted a 10-year average annual return of 17.2 per cent for the period ended Aug. 31. In comparison, Ms. Shannon's CI Canadian Investment fund returned 13.6 per cent.

It's a safe bet that CI will be touting Tetrem's talents in the weeks to come as a means to quell the nasty bun fight brewing over Ms. Shannon's career move.

On Oct. 3, Ms. Shannon dumped CI in favour of a new strategic alliance with Brandes Investment Partners LP. The move ended a lucrative 10-year relationship with CI in favour of an innovative partnership with Brandes. Under the terms of the deal, the two parties will share, on a 50-50 basis, all the revenues and all the costs.

Problem is Ms. Shannon told the media of her plans before telling CI executives. To make matters worse, CI was about to take Ms. Shannon on a whirlwind road show, touting her management skills to several hundred financial advisers. The coup de grace came Wednesday when Brandes began putting in friendly calls to advisers with clients holding Ms. Shannon's CI funds.

Though such tactics are not unusual in the fund industry, CI is understandably upset and alleges there has been a breach of contract by Ms. Shannon's firm, Sionna Investment Managers Inc. As is required, Sionna has given CI 60 days notice while CI looks around for a replacement manager. Industry rivals have come to CI's defence; one senior executive described last week's events as "a tacky way of doing business."

It's not the first time the Brandes team has made some stealth moves that upset the competition. In 2002, Brandes hired a score of senior people away from AIM Funds Management Inc. as part of its Canadian startup. One of these individuals walked out with a disc loaded with the particulars on advisers who have sold AIM funds. The information got loaded on to Brandes' computers. On this, all parties agree, according to court documents.

In a confidential agreement, the two sides eventually settled all of their outstanding legal disputes.

Keith Damsell is editor of GlobeinvestorGOLD

kdamsell@globeandmail.com

© 2007 The Globe and Mail. All rights reserved.

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