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Altamira CEO strives to pull firm out of its slumber

Some still wonder if return to darling status is possible

MUTUAL FUNDS REPORTER

If Charles Guay has his way, the Altamira brand is about to undergo a Lazarus-like resurrection.

"We're trying to do everything," said Mr. Guay, president and chief executive officer of Altamira Investment Services Inc., in his first interview since taking charge of the fund company 18 months ago. "Let me rephrase that. We're trying to do everything that is an opportunity for us."

There's much agreement that the energetic 34-year-old executive has his work cut out for him. Altamira, a no-load fund industry darling a decade ago with a roster of star fund managers including Frank Mersch and Ian Ainsworth, is a shadow of its former self. Long-term mutual fund assets under management have slid about 40 per cent over the past decade; fund performance continues to lag the competition. Many wonder openly if Altamira is beyond repair.

"It's the branding challenge of a lifetime," said Peter Loach, fund analyst at BMO Nesbitt Burns Inc.

Four years ago, Altamira was acquired by National Bank of Canada, a $472-million deal that made strategic sense for both firms. The collapse of the tech bubble left aggressive Altamira in need of some stability. National Bank, meanwhile, was a banking powerhouse in Quebec but lacked a platform for growth in English Canada.

Strategically, there was a deep disconnect between senior management of Altamira's Toronto operations and the bank's Montreal head office.

Between June, 2002, and the spring of 2005, four different men held the title of Altamira president and chief executive officer. While fund management duties were shuffled and administrative functions consolidated, little was done to build the Altamira brand.

Mr. Guay, an ambitious sales executive who joined National Bank Securities in 2001, was given the Altamira assignment in May, 2005. His timing was fortunate. Six months earlier, the fund company launched Altamira High-Interest CashPerformer, a deposit product that was rapidly gaining favour with investors.

CashPerformer's margins are tiny in comparison to equity funds but volume has been intense. Assets have swelled to more than $4-billion and the product has been emulated by other firms, including Dundee Corp. and E*Trade Canada. More importantly, it has provided Altamira, a direct sales company, with a means to leverage growth through once elusive third-party financial advisers who have been busy sinking client dollars into CashPerformer.

In October, Altamira unveiled Meritage, a so-called "wrap" that blends a pool of third-party funds to meet client needs.

Wraps have become the industry's success story, accounting for about $126-billion in assets today, up from about $53-billion in 2000, reports Toronto research firm Investor Economics.

Meritage has received a strong reception, raking in about $135-million in net sales in the first two months of business. At present, 45 wealth management firms and their advisers are supporting Meritage. Mr. Guay hopes Altamira may be able to emulate the success of the Big Five banks and build sales through two distribution channels, directly to the consumer and via third-party advisers.

More products are in the works, including guaranteed investment certificates and principal-protected notes, he said.

Altamira, once an industry leader, is now an "agile follower," Mr. Guay said.

"Instead of trying to reinvent the wheel . . . it's more looking at what is there while asking ourselves what we can do to improve it?" he said, adding that Altamira's biggest risk is to do nothing.

"The status quo is not an option. . . . What are our strengths? Can we build on these trends? Can we tweak a few things?"

While Altamira may be waking up from its four-year slumber, the catch is that the fund industry, in the interim, has been working over time and making the most of Canada's equity bull market. Advisers are doing business with fewer firms, wraps are ubiquitous and fund performance under scrutiny like never before.

Altamira "has certainly been low profile for the last few years," said independent fund analyst Dan Hallett. "They are launching new products in a very crowded field. . . . It's an awfully tough road ahead."

Managed assets

$6.4-BILLION

Assets under management in February, 1997.

$4.5-BILLION

Assets under management in June, 2002, when Altamira was acquired by National Bank of Canada.

$3.8-BILLION

Assets under management in November, 2006.

© 2007 The Globe and Mail. All rights reserved.

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