CI Financial has struck a deal to purchase Hartford Investments, the Canadian mutual fund operations of U.S. fund giant, The Hartford Financial Services Group.
“Hartford Investments has been one of Canada’s fastest-growing mutual fund companies over the past five years, having developed a strong lineup of portfolio managers and excellent relationships with dealers and advisors,” said Stephen A. MacPhail, CI president and CEO.
Hartford Investments’ product lineup consists of 18 mutual funds, with about $1.75 billion in assets. The purchase will increase CI’s retail assets under management to approximately $68.4 billion.
The acquisition brings some extra star power to CI, as three of Hartford Investments’ funds are managed or co-managed by Black Creek Investment Management, the company founded by Bill Kanko. The Black Creek investment team also includes Richard Jenkins.
The funds Black Creek advises—Hartford Global Leaders, Hartford Global Balanced and Hartford International Equity—account for nearly 30% of Hartford’s assets, at about $514 million in AUM (at the end of August 2010).
“[Black Creek] do a good job on some of the funds, so our view is that its good to have them,” MacPhail says. “They weren’t the only reason for doing the deal, but we really felt there was a opportunity to help them build their business. That was one of the opportunities I saw when we looked at Hartford.”
He says CI would prefer to maintain the funds as a distinct brand within the CI family, similar to the Signature or Harbour funds.
“We prefer to have a number of different money managers, acknowledging that each one offers a bit of a different style,” he says. “Even if you have two value managers, they’re never the same. A lot of the assets at Hartford are concentrated in a few of the funds, and those funds are all of interest to us.”
MacPhail points out that the costs of maintaining a separate $15 million money market fund mean that at least one fund merger is virtually a foregone conclusion.
CI has been associated with some high-profile consolidation talks in the past few years, kicking the tires on DundeeWealth in 2007 and taking a run at Clarington Funds in 2005. Neither deal came together for CI, but the fund giant was itself in play in 2008, when Sun Life sold its 37% stake in the company to Scotiabank.
The transaction is expected to close in December, subject to approval of Canadian securities regulatory authorities.
David N. Levenson, president of The Hartford’s Wealth Management business, said the sale will allow his company to focus its energies on core U.S. operations. As an added bonus, the deal will generate “additional capital flexibility and shareholder value,” Levenson said.
(10/21/10)