Editor's note: A previous version of this story stated that Mackenzie is phasing out its precious metals fund. This fund is being combined with another precious metals fund.
Mackenzie Financial Corp. is merging and renaming many of its mutual funds in a massive effort to pare down its lineup.
The changes will take 29 funds off the shelf (about a third of Mackenzie's current lineup) in a move that highlights the challenges facing many fund companies: Products need to be retooled to adjust to higher regulatory costs, reduced investor appetite for risk and declining margins.
"I, and my team, travelled the country and talked to financial advisers and analysts … about how we could make it easier to navigate our fund lineup," said Mary Taylor, Mackenzie's executive vice-president of product and marketing. They found two core problems with Mackenzie's products: Too many funds, and too many brands.
The restructuring involves merging funds that overlap, are underperforming, or have narrow mandates. Some of these funds have shrunk over the past few years and are less efficient to run. Several sector funds, including health care and technology are being phased out.
Mackenzie had $64.3-billion in assets under management as of March 31.
Last year, GMP analyst Stephen Boland said that Mackenzie's tepid revenue growth and depressed fund performance indicated a need for change at the company, suggesting a sale by parent company IGM Financial Inc. could be a viable option.
Similar sale rumours may circulate again following the new adjustments, but some conditions have changed. IGM's stock is up 14 per cent since Mr. Boland's note in late-June 2012 and he views IGM's stock more favourably now, putting his first buy rating on IGM in February. He wrote at the time that performance at Mackenzie had the potential for positive inflows, and its exclusive distribution relationship with Laurentian Bank could help increase sales.
After making acquisitions over the past few years, Mackenzie had amassed funds under many legacy names, but only the best-recognized, such as Cundill and Ivy, will survive the reorganization. One fund manager is leaving the firm, and three relationships with sub-advisory partners have ended.
Tuesday's changes also addressed regulatory concerns the company has observed in recent months. "There's no question that the regulators embrace simplicity for investors, and truth in naming," Ms. Taylor said. "Rather than calling something "enterprise" – what does that mean to people? Call it what it is, a small-cap fund."
The 2013 federal budget also put pressure on the fund industry when it made changes to tax-efficient "character conversion transactions," which caused Mackenzie to cap 12 funds earlier this month.
The company said it will take until December to finalize the changes.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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