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CI eyes an expansion of its empire

awillis@globeandmail.com

Bill Holland, founder of CI Financial, is not lacking in ambition.

No matter what size investment you are making, Mr. Holland wants to put a CI fund into your portfolio. So small investors and do-it-yourself types buy through discount brokerages and financial planners, and CI Financial has its own large network of these sales agents.

The fund company is also well represented with stockbrokers, and has all sorts of ties into the insurance crowd, in part because of a strong relationship with Sun Life Financial and its agents. An evolving relationship with Bank of Nova Scotia promises even greater distribution clout.

But Mr. Holland and his colleagues want more. They want to ramp up CI's share of some of the biggest wallets in the land - smaller corporate pension funds and endowments that outsource portfolio management. Which brings us to yesterday's launch of CI Institutional Asset Management.

CI is rolling all of its own institutional clients with those of one of its units, KBSH Capital Management, which has $8-billion under management. That's a 10th of CI's total assets. The idea is to put a whole new emphasis on selling CI's services to the institutional crowd. It also marks a new effort at building on a KBSH franchise that CI Financial acquired back in the spring of 2007.

"CI has been very successful in developing partnerships with a number of large financial institutions, and we are now gaining increasing business with defined contribution pension plans," Peter Anderson, the head of the fund's investment arm, said yesterday in a press release. In targeting this institutional clientele, CI Financial is taking on mutual fund rivals such as Fidelity, the banks and high-end money managers such as Jarislowsky Fraser and McLean Budden.

New mining man at TD

TD Securities has a new top banker covering the mining sector.

The dealer handed the reins in its mining group to Michael Faralla, a 10-year veteran of investment banking. He replaces Ewan Mason, who has left the firm. Mr. Faralla moves over from the equity capital markets group, where he worked with mining and oil and gas companies that were looking to sell stock.

Under Mr. Mason, who joined the firm four years ago, the dealer made a name for itself representing some of the world's big miners when they looked at purchases in Canada, from Companhia Vale do Rio Doce to BHP Billiton and Xstrata. The TD flag doesn't show up as frequently at medium- and large-capitalization Canadian miners, doing made-in-Canada deals, which will undoubtedly be a focus for Mr. Faralla. The Rhodes scholar has an extensive finance background and worked in the industry at Anglo American.

Sliding ABCP

The first signs of trading in the asset-backed commercial paper market do not bode well for investors who continue to hold this troubled debt.

A $32-billion slice of Canada's ABCP market was restructured last year after 18 grinding months of corporate brinksmanship. Most retail investors got paid out at 100 cents on the dollar. However, institutional holders of this supposedly low-risk debt - everyone from junior mining companies to pension plans - took a haircut on its value by swapping the short-term paper for much longer-term notes.

These notes are now called Master Asset Vehicles, or MAV. There is MAVI and MAVII, and various flavours with varying degrees of perceived risk. Owners of MAVI and MAVII debt tend to value the paper at something in the 50 to 60 cents on the dollar range.

Last week saw two small chunks of this debt change hands. When you read the price, you'll understand why so many financial institutions want a degree of flexibility on market-to-market valuations of their troubled holdings. There was a $170,000 trade in MAVI bonds that took place at 35 cents on the dollar. An even smaller, $70,000 trade in the MAVII notes played out at the same price.

Should pension funds such as the Caisse de dépôt et placement du Québec now slash the valuation on their own, large MAV note holdings to reflect these trades, which likely played out on behalf of some unfortunate junior miner?

In a word, no. Major investors can afford to hold their MAV notes to maturity, and the price of this debt is likely to rise. But the trading that is now playing out shows the restructured ABCP market is still worth a fraction of what it was before the credit crisis.

© 2007 The Globe and Mail. All rights reserved.

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