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Barry Allen, runs Marret Asset Management and manages a number of high yield funds. He is seen in his Toronto office on February 2, 2011.JENNIFER ROBERTS/The Globe and Mail

CI Financial Corp.'s chief executive officer says the firm is "absolutely" committed to sticking with Marret Asset Management Inc., run by long-time bond manager Barry Allan, despite signs that the company is struggling.

"As we go forward, I think it will continue to be better," Stephen MacPhail, CI Financial's CEO, said in an interview on the prospects for Marret, whose portfolio managers are responsible for running a good chunk of CI's fixed-income business.

Mr. Allan is one of the best-known fixed income managers on Bay Street, and he founded Marret in 2000. In November, 2013, CI acquired 65 per cent of Marret. The deal beefed up CI's presence in fixed income, an area where the company lagged.

The exact terms of the deal were not made public, but CI paid only a portion of the purchase price up front in shares. The balance is due to be paid next year and it is wholly dependent upon performance. If Marret's existing business went gangbusters, CI would eventually be on the hook for $25-million in total (including the amount already paid).

But CI is currently valuing its 65-per-cent stake in Marret at $12.5-million. So unless Marret stages a drastic turnaround, CI will pay about half the amount it would have paid if the bond manager had outperformed. So why hasn't Marret been a slam dunk?

The biggest problem has been Marret's closed-end funds, which have suffered from redemptions because of underperformance. The firm is winding down the Marret High Yield Strategies Fund and the Marret Multi-Strategy Income Fund.

Marret had $2.1-billion under management in closed-end funds, pension assets and private client money when CI acquired it. Mr. Allen says Marret currently has $3.6-billion under management.

While Marret hasn't had a serious problem with employee turnover, it did lose one high-profile fund manager after the acquisition. Long-time portfolio manager Dorothea Mell, who had been with the firm since 2002 and specialized in high-yield debt, left about six months ago.

The bright spot for Marret is its private client and high-net-worth business.

Despite some adjustments, Mr. Allan and portfolio manager Paul Sandhu are also now firmly ensconced within CI and managing billions in fixed-income assets within the firm – much of that in CI's balanced funds. Mr. Sandhu, in particular, is "very well known in CI channels," Mr. MacPhail said.

And while Mr. Allan and the other original shareholders of Marret are perhaps unlikely to pocket nearly as much as they had hoped in 2013, their futures are probably more secure working under a giant than if they had tried to stick it out as an independent.

As in most of its acquisitions, CI has taken over all the compliance operations and back-office administration that Mr. Allan had to previously contend with. That has left him and his team more time to focus on money management.

For Marret, one of the biggest rationales for selling was access to CI's vast distribution network. No more duking it out with the big banks and the other larger independents, which have vast fund sales forces.

As to whether CI will end up buying the rest of Marret, Mr. MacPhail was non-committal. "At some point in time, we might buy the remaining or we may not," he said. "It's not a value add to us right now."

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