Som Seif, founder of Claymore Investments Inc., is taking aim at the high-cost, opaque world of retail investing with the upcoming launch of five new funds available in exchange traded fund and mutual fund classes.
Toronto-based Purpose Investments, Mr. Seif's new company, will roll out a suite of ETFs and mutual funds on Sept. 3 that will be available for purchase through a discount brokerage or adviser. The funds will have fees no higher than 80 basis points for the most complex investments and will be managed by hedge fund company Breton Hill Capital Ltd., Purpose's part owner.
Mr. Seif says he can outperform many hedge funds by applying principles used by institutional money managers at a very low cost, with higher transparency. The unusual blended investment strategy will meet the market at a time when many independent asset managers are looking to mix passive and active strategies to cater to increasingly fee-conscious investors.
"Whether you're buying a benchmark index or you're buying an active strategy you need to know what the strategy is and focus on what you're paying for it," Mr. Seif said. "The industry hasn't done a good job in that discussion."
Toronto-based alternative asset management firm Breton Hill has kept a low profile in Toronto, but attracted seed investment from pension fund giant California Public Employees' Retirement System (Calpers) a couple of years ago.
A big part of the strategy is offering corporate class mutual funds, which are structured as shares in a corporation rather than a trust and have tax advantages. Purpose is also offering corporate class ETFs that allow people to move their money between investment products without triggering capital gains – the first of their kind, according to Mr. Seif.
Purpose isn't the only asset manager looking to hybrid mutual fund and ETF strategies to attract clients. Bank of Montreal has built its portfolio of blended ETF and mutual fund products, even when it has cannibalized some of the bank's existing mutual fund sales. The bank also has distribution advantages because it can sell its funds through the bank.
ETF titan BlackRock has also tried to get in on this trend, launching in August a suite of seven mutual funds made up of iShares ETF to expand even further into the Canadian investment marketplace.
And mutual fund company AGF Investments Inc. recently launched a fund called U.S. AlphaSector Class, which consists of 10 ETFs that reflect different sectors in the S&P 500 with one short-term treasury. "There's a lot of demand for this type of product from advisers and investors," said Gordon Forrester, head of retail at AGF. He noted that the fund's cost would be in line with other U.S. equity funds.
( Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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