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Mutual Fund News

Sun Life heading back into mutual fund sales, and CI could feel the effect

INVESTMENT FUNDS REPORTER

Sun Life Financial Inc. plans to get back into the mutual fund business this fall in Canada, a move expected to eventually siphon some sales away from partner CI Financial Corp.

The insurer will start a new fund family largely run by its Boston-based subsidiary, MFS Investment Management. It will also tap into expertise from other units, including Bombay-based Birla Sun Life Asset Management Co. and Toronto-based institutional manager McLean Budden.

The Sun Life funds will be sold by the firm's network of 3,700 advisers alongside mutual and segregated funds managed by CI Financial, and will also be available through other independent financial planning firms and brokerages.

"If you looked out two years, [Sun Life] would be getting some of the market share that we get on new sales," CI Financial chief executive officer Bill Holland acknowledged Thursday. "But in the scheme of a company the size of CI, I think it is relatively immaterial."

Sun Life got out of the fund business in Canada in 2002 when it struck a deal to become the largest shareholder in CI Financial, and sold its two mutual fund subsidiaries - Spectrum Investment Management Ltd. and Clarica Diversico - to what is now Canada's third-largest fund company.

The Toronto-based insurer began to sell funds run by CI Financial, and that partnership continued after Bank of Nova Scotia bought Sun Life's 37-per-cent stake in the that fund company in 2008.

Kevin Dougherty, president of Sun Life Financial Canada, would not discuss details of the "strategic partnership" with CI Financial, but insisted that its funds will continue to be sold by Sun Life's advisers.

"CI is one of the strongest Canadian equity managers in Canada, and they are very much at the core of our offerings," he said. "The mission here is to bring to market funds that are not widely available to Canadian investors today."

Launching a mutual fund company is a major part of Sun Life's strategy to build its wealth management business in Canada, Mr. Dougherty said.

GMP Securities analyst Stephen Boland, who has a "buy" rating on CI Financial and a target of $27 a share on its stock, does not expect that Sun Life's new mutual fund business will have a financial impact on CI for "at least several years ... We believe that Sun Life represents 15 per cent of CI's gross sales [annually]," he wrote in a note to clients.

"We believe it took many years for CI to gain traction with Sun Life agents and the CI brand is well known in Canada. We do not believe the MFS brand has the same brand recognition so it will take time for that to occur and gain traction."

****

WHAT IS MFS INVESTMENT MANAGEMENT?

Sun Life's Boston-based subsidiary started the first mutual fund in the world in 1924.

Had $195-billion (U.S.) in assets under management at March 31.

Has offices in 19 countries, including London, Tokyo and Singapore.

Doubled first-quarter profit to $49-million from a year ago.

© 2007 The Globe and Mail. All rights reserved.

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