Seeking to offer high net-worth investors an alternative to mutual funds, Fidelity Investments Canada has launched a new suite of investment pools that caters to this growing segment of the Canadian population.

The Fidelity Private Investment Program features nine investment pools that cover a range of asset classes and volatility levels, including Canadian equities, global equities, fixed income assets, money market investments, and others. The program also features two diversified balanced pools.

The pools are managed by portfolio managers at Fidelity Management and Research Company, along with institutional investment management firm Pyramis Global Advisors, owned by Fidelity.

What sets the program apart is its investment focus on specific stocks, as opposed to specific sectors, according to Darren Farkas, vice-president of Product Solutions at Fidelity.

“We want to give our clients full exposure,” he said, explaining the pools provide broad exposure to all sectors.

Although the launch comes at a difficult time for all investors, it targets a portion of the investment population that Fidelity expects to grow significantly in the years to come. High net-worth investors currently control roughly 76% of Canada’s financial wealth — a number expected to grow to 84%, or $4.5 trillion, by 2016.

The development of the program, which took roughly a year and a half, involved consultations across the country for input on products that appeal to both high net-worth investors and the advisors that work with them. High in demand are products with low costs, tax advantages, and flexibility, according to Farkas,

“They are looking for something new,” he said.

The annual management fees for the private investment pools, which vary for each pool and each series, are lower than mutual fund fees, says Farkas. Some series of the products also feature flexible trailer fees, so that advisors can work with clients to decide on an appropriate amount, ranging from 0 to 125 basis points.

Seeking to offer investors flexibility and control, the program also allows portfolio customization. Investors can choose to invest a minimum of $150,000 in any pool, or a minimum of $500,000 for custom portfolio service that lets them spread their investments across any of the pools.

“They’re looking for exclusivity,” said Farkas.

Under the custom portfolio service, investors can design their own portfolio, or can choose from one of five model portfolios created by Fidelity. Investors can also work with their advisors to implement either fixed or roll-down rebalancing options.

Clients will also receive enhanced quarterly reporting on the status of their investments, and ongoing market and portfolio commentary.

The program offers investors tax advantages, with most pools available in Fidelity Capital Structure Corporation, providing investors with non-registered accounts the ability to switch between pools while deferring tax. For cash flow, most pools are also available with Fidelity T-SWP, Fidelity’s tax-efficient withdrawal program.

The Private Investment Program will likely expand and evolve into a larger-scale investment program for high net-worth investors, according to Chris Pepper, Fidelity’s director of corporate affairs.

“This will be an evolving business,” he said, explaining that the company plans to add new pools as the program grows.

A 10th pool is set to become available in the near-term, which will be a specialty U.S. 130/30 pool with a higher level of volatility than the nine existing ones. It will be available by Offering Memorandum in the months ahead.

IE