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Marret scores with high-yield fund

awillis@globeandmail.com

In a deal that's going to attract all sorts of attention from rival institutional managers, Marret Asset Management shot the lights out yesterday, launching a new high-yield fund that attracted assets worth $228-million.

At a time when many closed-end offerings struggle to attract a following, the Marret High Yield Strategies Fund proved a hit with individual investors, a whole new world of clients for Marret. The fund was launched in early May, with RBC Dominion Securities and GMP Securities leading a 13-dealer sales syndicate.

Marret's fund closed yesterday after gathering an eye-popping level of assets, with $215-million committed, and another $13-million expected as the underwriters exercise their option to sell additional units. The majority of closed-end products flogged over the past two years raised less than $50-million. At that size, fees eat away at results, and performance is likely to disappoint.

The other hot offering was last month's $400-million Claymore Gold Bullion Trust, which offered a direct play on gold. TD Securities and GMP Securities led that deal. Claymore is now back out with a silver bullion trust.

Marret's offering was pitched at income-hungry investors who want a degree of capital preservation.

The target is 8 per cent annual payouts on a portfolio of bonds of all flavours, and units were sold at $10 each.

This type of product appeals to the audience that used to snap up income trusts.

Marret is an eight-year-old money manager with $2-billion in fixed-income assets, reflecting support from pension funds and other charter members of the institutional crowd. It was founded by Altamira's former all-star bond fund manager, Barry Allan. He is backed by the unique talents of David Gluskin, who has been an agent of change in Canadian fixed-income markets for more than three decades, at Nesbitt Thomson and Goldman Sachs. And yes, he's Ira's brother.

What's going to turn heads is Marret's ability to reach out of its traditional client base and into the far larger Canadian retail investor market. A few other institutional managers have tried to do this, with varying degrees of success. Connor Clark & Lunn and Phillips Hager & North would qualify as two of the more successful practitioners.

With growth hard to come by in the institutional space, peers in the hedge fund and traditional domestic money management community may try to duplicate Marret's feat.

NORTHLAND SWEETENS BID

Northland Power Income Fund NPI.DB-T has sweetened the terms of a planned takeover, but institutional investors remain unimpressed and plan to vote against the deal.

Northland, which runs six power plants, has faced strong opposition to a planned $370-million purchase of a private company controlled by the trust's chairman, James Temerty, ever since the takeover was announced back in April.

The fight is over price: Institutions and analysts say Northland is overpaying for Mr. Temerty's company, which is developing a number of generating projects and called Northland Power Inc., or NPI. The heart of the deal would see Northland pay 41.9 million units for NPI, which would leave Mr. Temerty with 39 per cent of the income trust and senior managers with another 6 per cent.

In the face of lobbying from unitholders, Northland announced Tuesday that it will make the price paid for NPI partly conditional on the company's future profits. Northland said it will reduce the number of units it pays for NPI by up to 18 per cent if the private company's projects end up contributing less than $75-million of profit to the income trust in two year's time. "The amendment responds to concerns about the value of NPI's development activities that have been raised by certain institutional investors," John Brace, CEO at NPI and the fund's manager, said in a press release on Tuesday. "It transfers the majority of the development risk to the sellers."

Mr. Brace also pointed out that RiskMetrics Group, which advises the institutional community on votes, recommended Northland unitholders approve the takeover.

The amendment hasn't swayed money managers. Sources say institutional shareholders holding about 25 per cent of Northland still plan to vote against the acquisition. While substantial, that's not enough votes to kill the deal: Northland needs 66.6 per cent approval from unitholders to go forward with the NPI purchase. Individual shareholders own the majority of Northland units and control the fate of the NPI purchase. Unitholders face a deadline today to vote by proxy, with the fate of the takeover will be determined at Northland's annual meeting on June 22.

CORMARK LOSES ANALYST

Cormark Securities recently lost its base metals analyst to one of the companies it covers, as Jason Reid accepted an executive position in Australia at uranium miner Paladin Energy. Employee-owned Cormark filled that slot yesterday by hiring Cliff Hale-Sanders away from CIBC World Markets. Cormark is an active player in all aspects of mining. Mr. Hale-Sanders covered uranium plays at CIBC, along with Teck Resources and the rest of the Canadian based metal miners. He will start at Cormark in July.

© 2007 The Globe and Mail. All rights reserved.

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