13 March 2006

Net Mutual Fund Redemptions for 3 Banks During RRSP Season

The Globe and Mail, Keith Damsell, 13 March 2006

Canada's big banks are posting some starkly different mutual fund sales this registered retirement savings plan season.

The fund arms of Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal and their subsidiaries continue to excel, racking up a staggering $3.6-billion in combined estimated net sales in January and February. Industry leader RBC alone accounts for about $1.8-billion in new business.

It's a very different picture at the banking sector's three remaining players: Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank of Canada. The three banks and their subsidiaries actually dipped into negative territory in two of the busiest months of the year for fund sales, reporting combined net redemptions of $144-million to the Investment Funds Institute of Canada.

Victory for the banks hinges on competitive products and distribution, said Dan Richards, a Toronto fund marketing consultant. "The formula for success . . . is strategically not that complex. The execution is where it ends up being more challenging," he said.

• Scotia Securities Inc.

Assets under management: $15.3-billion
Net redemptions in January and February: $97-million

Scotiabank is "not a strong wealth management player period," said Mario Mendonca, an analyst at Genuity Capital Markets.

A number of industry sources report there's little excitement to be found within the bank's in-house group of funds. Wrap accounts are Scotia's best-selling fund product and the biggest of these, the $2.2-billion Scotia Partners portfolios, is largely managed by third-party firms including CI Financial Inc. and AIM Funds Management Inc.

"It's not an issue of capability. We are really trying to do what is right for our customers," said Ian Filderman, Scotiabank's director of mutual funds.

Wealth management is a priority of Scotiabank president and chief executive officer Richard Waugh. He plans to double the bank's financial sales force and is considering potential acquisitions.

• CIBC Asset Management Inc.

Assets under management: $45.9-billion
Net sales in January and February: $31-million

There's a widely held view that CIBC, a fund industry leader in the 1990s, has dropped the ball in recent years. There's a dearth of in-house funds generating sizzle and little effort to market the once-powerful Talvest brand. Industry sources suggest restructuring efforts across the bank are to blame for the current malaise, including plans to cut $250-million in costs.

"We look at wealth management as a broad platform and some of it's measured in mutual funds and some of it is measured in other areas . . . where we have achieved immeasurable success," said Rob McLeod, CIBC spokesman. Like the bank executives interviewed, Mr. McLeod said IFIC data do not reflect the bank's third-party fund assets under administration.

Despite current woes, there's some optimism CIBC will soon be back on track. In recent months, the bank has addressed performance issues and changed portfolio managers across a long list of Renaissance and Talvest funds.

• National Bank Mutual Funds

Assets under management (including subsidiary Altamira Investment Services Inc.): $11.1-billion
Net redemptions in January and February, including Altamira: $78-million

National is largely a regional player with 350 branches in Quebec and only 105 branches in English Canada. Like Scotiabank, a large chunk of its fund business is managed by third-party firms, most notably Fidelity Investments Canada Ltd.

The bank's fund assets under management have, in fact, doubled over the past four years and are continuing to accumulate, reports Martin Lavigne, senior vice-president of National Bank Securities Inc. Strategic Portfolios, the bank's "fund of funds" portfolio launched in December, 2001, is a best-seller with more than $3-billion in assets.

"We are quite happy the way it is going. Momentum is great," Mr. Lavigne said.

The turnaround strategy of Altamira is unclear. While investors pour money into the Altamira High-Interest CashPerformer, the company's traditional fund business has shrunk to $3.8-billion, down from a peak of about $6.4-billion in 1997.