Dominion Bond Rating Service has upgraded the rating of Dundee Corp. with a stable trend.

DBRS said that the upgrade reflects a combination of factors that have recently been favourable for the company’s credit profile and that are consistent with its decision to change the rating trend to positive in March 2005.

Notably, DBRS said that Dundee is starting to achieve some scale economies in its wealth management business following a series of acquisitions that have added in-house distribution capacity, as well as significant assets under management and administration. “Dundee has also gained market share, notably in more income-oriented funds, which are less likely to experience cyclical outflows and volatility in market values,” the ratings agency added.

Also, DBRS said that Dundee’s wealth management and mutual fund businesses, “are currently thriving with good organic growth in investment assets and strong equity market appreciation. While there is a cyclical component to this improvement, the long-term outlook for the wealth management business remains favourable.”

DBRS added that the company’s liquidity profile has been substantially enhanced as real estate and resource investments have been transferred into new publicly-traded subsidiaries, providing additional sources of financial flexibility. Finally, earnings and the market value of Dundee’s investment portfolio have recovered, as anticipated, in line with equity markets, improved sales of mutual funds, and strong real estate and commodity prices.

The rating agency reported that Dundee Wealth Management, the company’s largest operating subsidiary and most stable source of earnings, reported a 13.7% increase in revenues in 2005 on an impressive 33% increase in AUM. The company remains leveraged to the performance of the equity markets and investor confidence, though this exposure is mitigated by the more integrated distribution channels, DBRS added.

“The company has struggled with the timely integration of its recent acquisitions, incurring higher-than-expected costs and delays with respect to establishing a common systems platform for its various products and distribution channels. While these integration costs have recently dampened reported earnings in this segment, the more efficient state-of-the-art platform is expected to provide a cost and service advantage to the company upon conversion,” DBRS said.

“Beyond wealth management operations, the company’s chosen exposures to real estate and primary resource issuers, while presently favourable for the Company’s financial performance, are a potential source of income volatility,” DBRS concluded.