Monday, January 16, 2006

Manulife's Fast Growing Fund Business

The Globe and Mail, Keith Damsell, 16 January 2006

Quick -- what was the fastest-growing major fund company last year? If you guessed one of the big banks or aggressive CI Financial Inc., you'd be wrong.

It may come as a surprise but the retail funds assets under management of insurance giant Manulife Financial Corp. grew by a stunning 60 per cent in 2005, climbing from about $4.9-billion in 2004 to $7.8-billion at the end of December. The nearest major firm is Bank of Montreal's BMO Funds, reporting a 28-per-cent gain in assets last year to $25.1-billion.

"A lot of people have overlooked us," said Donald Guloien, chairman and chief executive officer of MFC Global Investment Management, Manulife's investment arm that manages about $240-billion in assets.

"It's almost like coming out of the closet," he said. "Since 2002, we've actually grown very, very nicely and performance -- knock on wood -- is fantastic."

Manulife was largely absent from the fast-growing fund business a decade ago. Elliott & Page Ltd., the investment arm that was part of the 1995 acquisition of North American Life Assurance Co., focused largely on institutional clients. In 1997, the company lost the fight to buy Altamira Management Ltd. and senior management balked at paying a premium to build its presence in the retail fund business.

Instead, Manulife shifted its focus and reviewed its in-house capabilities. A 300-strong team of investment managers operating in silos across the company were brought together. The firm was among the first to acknowledge the income needs of an aging population; the well-regarded Elliott & Page Monthly High Income Fund, managed by Alan Wicks, has swelled to about $3.4-billion in assets. Meanwhile, the company built a strong sales team able to leverage off of Manulife Securities' vast brokerage network. There are now about 30 fund wholesalers across the country catering to financial advice channels.

"Manulife has really had a big turnaround over the last three or four years," said Dan Richards, an industry marketing consultant. A combination of building a retail focus, product innovation and distribution are behind the firm's success, he said.

But organic growth will take Manulife only so far in the retail fund space. Mr. Richards contends the company needs greater scale within its fund manufacturing and distribution operations if it wishes to compete with the big banks.

"The question is how do you grow that business to become a major player?" he said. "I've got to believe that if somebody significant came on the block . . . they would be a candidate to take them out."

Manulife has not ruled out potential acquisitions but "we see great opportunities for organic growth," Mr. Guloien said. "People buy you for an investment management team. . . . We care a lot about performance and being able to keep delivering."