Sandy McIntyre is tak-ing over the job as Sentry Select Capital Corp.’s chief investment officer at a time when the Toronto-based fund company is going through a significant shift in its strategy.
That transition is aimed at transforming Sentry from a niche player with expertise in resources and income trusts to a more broadly based, mainstream fund company with a product arsenal that includes core equity and fixed-income products as well as narrow, specialty funds.
“Sentry has been known as an income trust and resources shop, and that was appropriate for the initial stages of our evolution,” says McIntyre, a well-known fund manager. “The time has come to broaden the product line while maintaining the Sentry investment culture. We want to carry our investment style across a deeper family of funds — and my challenge is to accomplish that.”
Sentry has $6 billion in managed assets, about $1.5 billion of which are in regular mutual funds while the rest is in a mix of closed-end funds, structured notes and flow-through shares.
“Initially, Sentry wanted to offer specialty solutions,” McIntyre says. “But as we’ve evolved, our ability to manage a broader base of solutions has increased.”
Sentry will soon be introducing new products, including traditional mutual funds and structured products, which could include closed-end funds, flow-through shares or limited partnerships with predetermined lifespans that will ultimately be convertible into regular open-ended mutual funds as a means to gain liquidity for clients.
These structured products are often appropriate for delivering timely exposure to narrow sectors of the market, McIntyre says. By allowing clients eventually to convert to a regular mutual fund, Sentry gives clients the choice of either exiting their investment by cashing in a fully redeemable fund or staying within the Sentry family by switching among various funds.
By adding broadly diversified equity and fixed-income funds to the Sentry product lineup, the company will give clients the opportunity to switch to less volatile, more diversified fund portfolios. Sentry may also introduce short-term structured products on a continuing basis, bringing new clients into the broader family of open-ended funds as the structured products reach their maturity dates and become convertible.
“We will be doing some platform engineering, in which similar investments will be made available through slightly different structures,” McIntyre says. “Using the same building blocks, we could change the mix, but they will be built with similar components.”
Sentry faces a crowded and highly competitive market in the broad-based Canadian equity category, says Bhavna Hinduja, an analyst with Morningstar Canada in Toronto: “From a business standpoint, it makes sense for Sentry to broaden its scope. But it will need to woo advisors. And while the company has expertise on the Canadian side, particularly in resources and income trusts, it currently lacks in-house global equity expertise.”
Sentry has already introduced a handful of closed-end funds that trade on the Toronto Stock Exchange but follow the model of future convertibility into an open-ended Sentry fund, including an infrastructure fund, a China fund and a global real estate fund — all managed by outside managers. McIntyre sees potential in the U.S. financial services sector, which he describes as “washed out.”
McIntyre has achieved an admirable track record as lead manager of Sentry Select Canadian Income Fund, which was launched in 2002. The fund has an average annual compound return of 19.3% for the five years ended April 30, beating the market index and the fund category average. Although income trusts will no longer exist after 2011, McIntyre says, other income-producing investments, such as dividend-paying stocks and high-yield corporate bonds, will take their place.
“The need for investment income has not gone away,” he says. “People need retirement solutions; and at today’s low interest rates, they’re not finding them in traditional conservative investments. The demographic trends are clear. You can’t legislate the need for income away. Our job is to reduce the risk required to obtain an acceptable level of income.”
McIntyre expects that Sentry will be adding to its lineup of fund managers as it broadens its product line. The firm will also be replacing oil and gas manager and vice president Glenn MacNeill, who is no longer with Sentry due to a corporate decision to “re-energize the management of those portfolios,” McIntyre says.
@page_break@Sentry is also revisiting its long-standing policy of offering only front-end load versions of its mutual funds, with no deferred sales charges.
“DSC versions would attract broader distribution,” McIntyre says. “With a broader selection of funds within the family, clients would be able to move between asset classes when desired without triggering the DSC.” IE
McIntyre to lead Sentry Select’s big shift
The niche fund company is aiming to become more mainstream
- By: Jade Hemeon
- June 3, 2008 June 3, 2008
- 09:22