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Mutual Fund News

Dundee seen as auction winner

Ned Goodman's firm is growing, and Berkshire looks ripe for taking, writes KEITH DAMSELL

MUTUAL FUNDS REPORTER

Dundee Wealth Management Inc. is the dark-horse favourite to win Berkshire Group of Cos.

The ongoing auction of Berkshire, the brokerage controlled by billionaire money manager Michael Lee-Chin, has been the worst-kept secret on Bay Street. Last summer, employees were told "a strategic partnership" was in the works. Then in October, staff were promised "a very attractive liquidity event for your shares in the next 24 months."

A deal sooner than later makes sense, a number of industry sources said. First, the value of Berkshire continues to slip as the best financial advisers abandon the firm for greener pastures. The prospect of one day cashing out is keeping many of the 800 Berkshire advisers that control about 15 per cent of the company's equity in a holding pattern, sources said.

Meanwhile, there's a growing sense that Mr. Lee-Chin needs the money, especially to finance struggling operations in the Caribbean. Startup losses of Mr. Lee-Chin's three-year-old AIC Financial Group Ltd. in the Republic of Trinidad and Tobago are significant. Forbes magazine last week reported the mutual fund executive's wealth has fallen to $1.6-billion (U.S.) from $2.1-billion one year ago and $2.5-billion in 2005. Mr. Lee-Chin, AIC and Berkshire all declined to comment.

Several firms have kicked Berkshire's tires over the past two years. A host of reasons have killed potential deals, including a valuation gap and Berkshire's potential liabilities.

But there's some agreement that Ned Goodman, the mercurial controlling shareholder of Dundee, may be the man of the moment. Mr. Goodman has the big banks in his sights and is keen on building the Dundee empire organically and via acquisitions. In February, Dundee was in the running to acquire Rockwater Capital Corp. but lost out to CI Financial Income Fund.

Dundee and Mr. Goodman declined to comment.

The brokerage and financial advice business will continue to consolidate. The safe money is betting only three firms will be left standing to battle the banks -- CI Financial, Power Corp.'s IGM Financial Inc. and, last but not least, Dundee.

Executive services

Buy gold, sell oil and pick up the dry cleaning. BMO Harris Private Banking, the wealth management arm of the Bank of Montreal, has launched enCircle Exec, a new service that blends banking with lifestyle services.

In addition to managing money, the bank can aid in "day-to-day tasks and emergencies," including groceries, gift wrapping and concert tickets.

The account minimum for enCircle Exec is $500,000 in investable assets. Fees are charged on a sliding scale based on the asset value of the portfolio, ranging from 1.5 per cent to 2 per cent.

The concierge service aimed at busy baby boomers is the first of its kind on Canada. There are a handful of similar services available to well-heeled Americans but it's worth noting that asset levels are significantly higher than BMO. For example, perks associated with Merrill Lynch & Co.'s Visa Signature card require a minimum investment of $10-million (U.S.)

A new guaranteed fund

IncomePlus is about to get some competition. In the next few weeks, insurance giant Sun Life Financial Inc. will unveil Sun Wise Elite, a portfolio of mutual funds that guarantees monthly payments independent of where an investor retires in the market cycle.

Sun Life is hoping to cash in on the success of IncomePlus. Manulife Financial Corp. launched the guaranteed income fund in October last year and it has been the hit product of this year's RRSP season. In just 19 weeks, sales passed the $1-billion mark.

The guarantee comes at a price -- fees are high. For example, the IncomePlus version of the Fidelity Monthly Income Fund has an annual management expense ratio of 3.4 per cent. In comparison, the non-guaranteed class A version of the same balanced fund has an MER of 2.38 per cent.

kdamsell@globeandmail.com

© 2007 The Globe and Mail. All rights reserved.

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