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Mutual Fund News

Market rout claims jobs in funds sector

FUNDS REPORTER; With files from reporter Andrew Willis

Canadian mutual fund companies are handing out pink slips to trim costs amid a brutal stock market downturn.

This week, AIC Ltd. laid off 53 of its 290 employees, almost or 20 per cent its staff, while Sentry Select Capital Corp. chopped 35 of its 160 employees.

Fidelity Investments Canada yesterday also laid off some of the 70 employees in its defined contribution pension fund record-keeping business - a business it is exiting- but would not give a number.

The layoffs come as the industry expects to announce more net redemptions in October after jittery investors yanked a record $4.5-billion from funds last month.

"We have to stay a lean and mean company," AIC's chief executive officer Jonathan Wellum said in an interview yesterday. "These market conditions are so difficult ... We have got to keep our cost structure [down] so that we remain profitable."

Privately owned AIC, which is controlled by billionaire Michael Lee-Chin, has been suffering from net redemptions for several years because its value investment style has been out favour. Some of its stock portfolios were also hit hard in recent times because they had holdings in the battered financial sector.

AIC, which is Canada's 19th largest fund company with $4.6-billion in assets, saw net outflows of $86-million in September. While the sharp market downturn is expected to spur consolidation in the industry, Mr. Wellum is adamant that AIC won't sell.

"To exit, no way," Mr. Wellum said. "We are not interested in anything but proving our point that quality [companies] and value investing win out," he said, adding that its funds have little exposure to the now-battered commodities sector.

Michael Kovacs, senior vice-president of sales at Toronto's Sentry Select Capital, echoed the need to cut costs.

"We have experienced a dramatic selloff in markets and it has affected all of us," he said.

DundeeWealth Inc. has laid off about 250 employees, or 15 per cent of its 1,700 workers, over the past eight months, but not because of the market downturn, said executive vice-president Robert Pattillo.

The staff reductions, which save about $30-million, are part of a reorganization announced in the late spring to eliminate duplication.

© 2007 The Globe and Mail. All rights reserved.

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