A new line of mutual funds has been launched by Brigata Capital Manage-ment Inc., an affiliate of Ottawa-based Independent Planning Group Inc.

The Brigata funds will be sold exclusively by the advisors of IPG. The family is starting off with two funds, Brigata Canadian Equity Fund and Brigata Canadian Balanced, but will be expanded in time.

“This is the beginning of a fund family,” says Vince Valenti, president of Brigata and IPG. “As advisors give us direction on what other products are needed,, we will expand the lineup. It could eventually include a fixed income or international fund, for example.”

Brigata Canadian Equity Fund is managed by Montreal-based C. F. G. Heward Investment Management Ltd., while Brigata Canadian Balanced Fund is managed by Ottawa-based Doherty & Associates Ltd.

“We are a conservative organization and wanted money managers that have a value-based philosophy in keeping with our own,” Valenti says. “As a distributor, we have had the opportunity to develop some relationships with some very good fund managers. We wanted to develop a product that our advisors could get behind and recommend wholeheartedly to their clients.”

He says the firm also hopes to benefit from the profit margins on the manufacturing side of the wealth-management business, which are known to be higher than on the distribution side.

Many advisors at IPG have become minority shareholders in Brigata, although Valenti stresses there is no pressure on advisors to become owners of Brigata or to sell Brigata funds.

He expects that within three to five years, the new Brigata family could make up 15% to 20% of assets under management at IPG, but stresses that IPG is not “limited to the product shelf” and a full array of competing funds are also available.

Although many mutual fund dealers are involved in interlocking ownership relationships with product manufacturers, including giants like Dundee Private Investors Ltd. of Toronto, Assante Capital Management Ltd. of Toronto and the big banks, there can be a perceived conflict of interest when advisors own a stake in the products they are selling. Dan Hallett, president of Dan Hallett & Associates Inc. in Windsor, Ont., does not see a problem as long as advisors clearly disclose any ownership relationships with fund companies.

“The goal seems to be to get some of the profits that money managers are enjoying,” says Hallett, “and full disclosure of the relationship to the product manufacturer is always the key.

“The reality is that often when there is an ownership relationship, advisors are extra cautious in recommending a product as there is the fear of bad optics. Some investor advocates have taken exception to this model, but I don’t think it can be discarded,” he adds.

Valenti says the goal is to keep management expense ratios down at the new funds. MERs will be capped at 2.4% on the two new funds, and could fall as the funds get to a size at which they can benefit by economies of scale. There will be no front- or back-end commissions paid to advisors, although advisors will be entitled to a trailer fee of 95 basis points. Valenti points out the trailer fee is about five basis points less than the 1% typically paid on no-load funds.

Hallett says that because of a proliferation of fund products, any new fund company must add value in “some way, shape or form.”

“We want the funds to be competitive in terms of investment performance as well as management fees,” Valenti says. “We have chosen value-oriented managers that have been in business for a long time and have strong long-term track records.” IE