Stephen McPhail, CI Financial CEOMIKE CASSESE
CI Financial Corp. has struck a deal to buy Hartford Investments from its U.S. insurance company parent, a move that could be the seed for future business relationships.
"We have two companies active in the wealth management business, and opportunities might arise," CI's chief executive officer Stephen MacPhail said Thursday.
CI, Canada's third-largest fund company, agreed to buy the Canadian fund arm, which has $1.8-billion in assets. The deal, which is set to close in December, will boost CI's retail assets to $68.4-billion. Terms of the transaction were not disclosed.
David Levenson, president of the Hartford's wealth management arm, said the divestiture would allow the firm to focus on its core U.S. operations. Hartford also recently filed with U.S. regulators to launch actively managed fixed-income exchange-traded funds.
Hartford Investments started in 2000, but didn't gain traction until external managers such as Bill Kanko and Richard Jenkins of Black Creek Investment Management Inc. signed on. The pair helped build up the Trimark mutual fund brand in Canada in the 1990s.
"We haven't asked assurance that they [Black Creek managers]are going to stay onboard, but from what we understand they would be quite optimistic about working with the likes of CI," Mr. MacPhail said. "We have no intention of changing anything to the advisory lineup of the Hartford funds."
Dan Hallett, director of asset management for HighView Financial Group, said CI would want to keep Blackcreek because of its strength in running global equity funds. Mr. Kanko's Hartford Global Leaders fund has had strong sales momentum, Mr. Hallett said.
The acquisition of Hartford Investments was also possible because its parent and CI have had good relationships with U.S. brokerage firm Edward Jones & Co., Mr. MacPhail said. The Canadian arm of Edward Jones is responsible for a good chunk of Hartford Investment's mutual fund sales.
Barclays Capital analyst John Aiken described the latest acquisition by CI as "positive," and suggested that negotiations with Hartford could "signal the start of an ongoing relationship with CI that could lead to incremental mandates or even distribution coming out of the insurer's U.S. operations."
The new relationship with Hartford is being forged as one of CI's other strategic partners, Sun Life Financial Corp., has returned to the fund business recently. Until Sun Life sold its stake in CI to Bank of Nova Scotia in 2008, it had been focused on selling CI-run mutual and segregated funds through its financial advisers. CI is 37-per-cent owned by Scotiabank, which has been more of a passive investor. Scotiabank, however, recently began selling a couple of newly created bank funds run by CI.