Manulife buys AIC funds

Manulife Financial has struck a deal to purchase the retail mutual fund business of AIC from Portland Holdings Inc., the private holding company of Michael Lee-Chin.

“This is a great fit for Manulife and AIC Limited,” said Paul Rooney, president and CEO of Manulife Canada. “When coupled with Manulife’s solid wealth management services, this agreement will strengthen our already strong product lineup that meets the needs of investors and their advisors.”

The transaction is expected to close by September 25, 2009, and remains subject to approval by regulators, the stock exchange and certain fund unit holders.

Under the terms of the deal, Manulife Mutual Funds will manage all AIC funds in Canada. Portland will maintain control of AIC Investment Services Inc., which will serve as sub-advisor to the following funds:

• AIC Advantage Fund; • AIC Advantage Fund II; • AIC American Advantage Fund; • AIC Global Advantage Fund; • AIC Diversified Canada Fund; • AIC Canadian Focused Fund; • AIC Advantage II Corporate Class; • AIC American Advantage Corporate Class; • AIC Global Advantage Corporate Class; • AIC Diversified Canada Corporate Class; • AIC Canadian Focused Corporate Class; • AIC Diversified Canada Segregated Fund (75% & 100% Guarantee)

Portland has said that AIC Investment Services will be renamed, but has provided no hints as to what that new brand might be.

“This sale reflects our overall strategy to return to our roots of managing money and concentrate on our investment advisory services,” said Lee-Chin, executive chairman of AIC Limited. “We are committed to ensuring our clients continue to receive high-quality service and are very pleased that Manulife Financial is the purchaser of our retail fund business, since they share our passion for providing advisors and clients with a broad array of products and services.”

The deal would boost assets under management at Manulife’s retail fund management arm to about $13.7 billion, leapfrogging Fonds Desjardins and National Bank Securities.

“We now have an excellent opportunity to broaden Manulife’s position in Canada’s wealth management market, while providing AIC’s fund clients access to Manulife’s broad platform of insurance, wealth and banking products and services,” said Rooney.

Last week, Manulife Financial announced it was cutting its quarterly dividend in half, to 13 cents per common share. At the time, the company stated that it was simply shoring up its capital position.

The insurer has issued billons in fresh debt and preferred shares since the stock market meltdown began last year, in an effort to surpass its capital requirements. The stock market decline left it with massive liabilities related to its guaranteed income products, and open to criticism that it had not adequately hedged its risks.

The acquisition of AIC suggests Manulife has achieved its stated goal of reaching “fortress” levels of capital.

This is not the first deal between Portland and Manulife. In 2007 the insurance giant bought Portland’s Berkshire Investment Group.

“By combining with Manulife, AIC can fully leverage the extraordinary strength and depth of a world-class financial services organization,” Lee-Chin said. “I believe this combined entity will become a formidable player within the Canadian wealth management landscape.”

AIC opened its doors in 1985 and rapidly grew to become one of Canada’s largest mutual fund companies. It was acquired by Portland Holdings founder Michael Lee-Chin in 1987.

It excelled in the 1990s and early 2000s, but has since suffered a long and at times not-so-slow bleed of assets. At the time of sale to Manulife, assets under management totaled about $3.8 billion.

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Read: AIC sale signals end of an era: analysts

(08/12/09)