The consolidating fund industry saw two more smaller players join forces yesterday, with a merger of Ethical Funds Co. and Northwest Mutual Funds Inc.
Vancouver-based Ethical Funds, owned by provincial credit unions, and Northwest, a unit of Groupe Desjardins, will combine to manage $5.5-billion in assets.
Ethical Funds, which markets socially responsible funds, will get access to the Quebec market through Desjardins' network of caisse populaires.
And Lévis, Que.-based Desjardins will more aggressively sell its Northwest funds across credit unions in Western Canada.
"Our opportunity is that Desjardins has access to six million clients, and we have four million clients," Don Rolfe, chief executive officer of Ethical Funds, said yesterday.
"Without access to distribution, it is very, very difficult to be able to continue to sell," Mr. Rolfe said, noting that Desjardins has just under 600 caisse populaires throughout Quebec, and others in Ontario."
Ethical Funds has been a leader in the socially responsible investing niche in Canada, but more players, such as bank, have been muscling in on its turf.
The mutual fund arms of Royal Bank of Canada and Toronto-Dominion Bank have begun marketing socially responsible products.
And Barclays Global Investors Canada Ltd., which is based in Toronto, has launched the first exchange-traded fund in Canada with a similar mandate.
"The banks are getting into it because they don't want to miss out on a growing market segment," Mr. Rolfe said.
Other entrants into this niche include companies such as Meritas Mutual Funds Inc., based in Cambridge, Ont., and Inhance Investment Management Inc. of Vancouver.
Mr. Rolfe said the merger will enable Ethical Funds to target institutional clients such as pension funds through Desjardins.
There are an estimated $500-billion in assets under management in Canada that use socially responsible screens, and the lion's share of that money is in institutional hands, he said.
Under the merger deal expected to close by year-end, Mr. Rolfe will be CEO of the new company - still to be named - that will be based in Toronto.
Northwest's president and chief operating officer Michael Butler will be COO.
Northwest, created in 1997 and acquired by Desjardins in 2003, has $2.78-billion in assets. Ethical Funds, created in 1992, has $2.67-billion in assets.
© 2007 The Globe and Mail. All rights reserved.
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