Desjardins acquires Northwest Mutual Funds

(July 31, 2003) Montreal-based Desjardins Financial is expanding its mutual fund operations, today announcing the acquisition of Northwest Mutual Funds, a division of First Asset Management. Under the terms of the deal, the Northwest team will continue to manage the firm’s eight funds and will also assume responsibility for Desjardins’ Maestral fund family.

Financial details of the agreement were not released. Northwest, which will become a subsidiary of Desjardins, has $546 million in assets under management while Maestral has $229 million.

“The acquisition of Northwest Mutual Funds represents a strategic move for Desjardins Financial Corporation and will enable its subsidiary, which specializes in mutual funds, to significantly expand its presence in the market of funds aimed at the intermediary networks across Canada,” said Desjardins president Monique Leroux.

“We are extremely enthusiastic about joining the Desjardins organization,” added Northwest president Michael Butler. “It provides our investors with an expanded line of products and services, not to mention the added efficiencies and resources that come from being associated with such an established firm.”

Morningstar vice-president Matthew Elder says Desjardins, a huge player in Quebec, is working to make its presence felt in the rest of the country. “It would have been much more challenging for them to create an external platform, outside Quebec, other than through acquisition,” he told Advisor.ca.

Industry analyst Dan Hallett says Northwest is an attractive target, performing well in a tough sales environment. The firm’s assets have grown 22% over the past year. But he says it’s clear that First Asset wants to focus on what appears to be a higher growth segment of the industry: fee-based accounts and other high net worth investment solutions.

On paper, the Northwest-Maestral combination is a good fit, says Hallett, who runs an independent investment research firm in Windsor, Ontario. “Both are sold through broker-dealer firms with standard load structures.”

But Northwest has double the assets and more strong fund performers compared to Maestral, Hallett tells Advisor.ca. “Most important, Northwest has had greater success gaining shelf space with advisors.

“I think leveraging Northwest’s momentum — particularly outside of Quebec — may result in strong synergistic benefits,” he adds.

Elder says although there is some overlap between the two fund families, it’s hard to predict if that will result in fund mergers. “There isn’t anything really unique looking in their mandates or holdings with the exception of their Canadian equity funds,” he says. “But we’ve seen situations after mergers where funds with virtually the same mandate have co-existed for years.”

The deal is expected to close at the end of September, subject to regulatory approval.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca