Citing increasing diversification into new lines of business, such as institutional money management and exchange-traded funds, Toronto-based Invesco Trimark Ltd. has resigned as a member of the Investment Funds Institute of Canada, also of Toronto.

“The nature of our business at Invesco Trimark is different than the focus at IFIC,” explains Invesco Trimark president Peter Intraligi. “It’s not good or bad; it’s just not a fit. The focus at IFIC is retail mutual funds, and our business is now so much more than that.”

Invesco Trimark has about $27 billion in retail fund assets under management, but, in recent years, some funds have suffered heavy redemptions. Invesco Trimark’s market share in this area began slipping when some of its high-profile investment fund managers left the firm.

Although Invesco Trimark is no longer supplying figures to IFIC, September numbers show the firm’s retail AUM had fallen by 10%, or $2.9 billion, since the start of the year. The firm had suffered net redemptions of $3.5 billion during the same period.

Invesco Trimark is a subsidiary of Atlanta-based global investment giant Invesco Ltd., which has AUM of more than US$600 billion worldwide. Intraligi says the Canadian subsidiary’s connection with its parent is leading to the development of exciting new business opportunities.

For example, Invesco Trimark’s line of 17 PowerShares mutual funds has garnered $690 million in AUM since being launched about a year ago. Each PowerShares fund essentially is a mutual fund wrapper around a PowerShares ETF product or index, allowing fund dealers to offer their clients ETF exposure normally available only to clients of securities dealers.

PowerShares ETFs, which trade in the U.S., are known as “intelligent ETFs”; they offer a more sophisticated investment strategy than simply replicating the performance of a popular index.

The PowerShares ETFs are devoted to a variety of investments, including those in emerging markets, China, India, agriculture, clean energy, gold, water industries, bonds and preferred shares.

They also include products covering well-known fundamental indices, such as the FTSE RAFI Canadian fundamental index, the FTSE RAFI global+ fundamental index and the FTSE RAFI U.S. fundamental index.

TRACKING INDICES

Unlike traditional ETFs, which track indices based on the market capitalization of the underlying securities, PowerShares ETFs track customized indices constructed by using fundamental variables, such as a company’s revenue, profitability or dividend history.

The ETFs held in Invesco’s PowerShares mutual funds are managed by PowerShares Capital Management LLC, another subsidiary of Invesco Trimark’s parent company. PowerShares manages about US$55 billion in ETF AUM, of which about $1 billion is held by Canadian investors.

Says Rudy Luukko, editor of investment funds and personal finance with Morningstar Canada in Toronto: “The presence of the Power-Shares ETFs is consistent with a broader strategy at Invesco Trimark to leverage the global capabilities of the parent company.”

Intraligi does not see the ETF business replacing traditional retail mutual funds at Invesco Trimark; rather, the former will complement the latter. He says clients’ investment portfolios can be augmented by adding ETFs in cases in which the strategy makes sense: “Advisors are looking at asset-allocation strategies that combine the active management of mutual funds with the passive management of ETFs. The two strategies can and do co-exist.”

In addition to the contribution of PowerShares, Invesco Trimark is getting a boost from its growing institutional business.

The parent company, Invesco, has capabilities in alternative strategies, such as distressed equities, real estate and private equity, and Invesco Trimark is bringing that expertise to Canada on the institutional side.

“Invesco is a multi-dimensional company that spans the globe,” Intraligi says, “and we are trying to bring the best of what we do to Canadian investors.”

It works the other way around as well, with Invesco (the parent) promoting the Canada-based Invesco Trimark investment team on a worldwide basis. Intraligi says about US$1 billion is invested in the Trimark brand by investors in the U.S., Britain and Japan.

Although Invesco Trimark will no longer be a member of IFIC, Intraligi says, the firm will continue to work with its industry counterparts on issues that affect fund manufacturers and investors.

Invesco Trimark is not the first major company to leave IFIC. CI Financial Corp. of Toronto withdrew in September 2006 but remains active in the mutual fund sector’s causes, such as lobbying against the implementation of the harmonized sales tax on fund-management fees.

“Fund-management firms are free to join or not, and not every firm is a member,” says Joanne De Laurentiis, IFIC’s president and CEO. “Invesco Trimark was a great member, and we’re sorry to see it go.” IE