After a frenzy of behind-the-scenes activity, IA Clarington Investments Inc., formed after Indus-trial Alliance Insurance and Fi-nancial Services Inc. acquired ClaringtonFunds Inc. last December, has taken the next step in rejigging its mutual fund lineup.

The merging of the two companies’ back offices, completed in July, has allowed full cost-free transferability among members of the merged families of IA and Clarington funds, enabling IA Clarington to move ahead with plans to eliminate funds that have overlapping mandates. The merged company is also reducing the management expenses on some funds and introducing a new global dividend fund.

“We are dealing with overlap, and streamlining the fund lineup so that investors have a clear set of fund choices in all the major asset groups,” says Eric Frape, vice president of product management for Toronto-based IA Clarington. “Removing redundant funds will allow us to be more efficient and improve the cost structure for investors. We’re also closing a couple of smaller funds for which we don’t see demand evolving.”

Among the proposed changes, which are subject to regulatory and investor approval, is the merger of nine mutual funds on Nov. 17 into funds with similar investment mandates. If an investor holds the funds outside of a registered account, he or she may incur a capital gain or loss on the mergers. The funds cover the investment spectrum and include money market, bond, dividend, equity, global, European, Asian and specialty equity funds.

Four of the nine funds — Growth, R European, R Asian and R Life & Health (previously part of the Industrial Alliance network) — will be merged in-to Clarington Global Equity Fund, subad-vised by Op-penheimerFunds Inc. of New York. The goal is to have most of the funds within the family branded under either the Clarington, IA or IA Clarington name, says Frape.

As part of the changes, R Money Market Fund and R Bond Fund, which remained intact after merging with similar Clarington-branded funds, will be renamed IA Money Market and IA Bond, respectively. All of the funds are considered to be part of the IA Clarington group.

The IA Clarington fund family will continue to combine Industrial Alliance Investment Management Inc. ’s internal management with leading external managers from Canada and abroad, including Jarislowsky Fraser Ltd. of Montreal, QVGD Investors Inc. of Calgary, Howson Tattersall Investment Counsel Ltd. of Toronto, Navellier & Associates Inc. of Nevada and TCW Investment Management Co. of New York.

Conspicuously absent is Halifax-based Seamark Asset Management Ltd. , which ran the bulk of Clarington’s assets before IA came along, Seamark was let go shortly after the takeover due to lagging performance.

IA Clarington has also filed a preliminary prospectus for Clarington Global Dividend Fund, to be advised by ABN AMRO Asset Management Canada Ltd. and its Netherlands-based parent, ABN AMRO Asset Management BV.

“On an industry basis, there continues to be strong demand for funds offering dividends or other types of income,” says Frape. “We launched the new fund as a way for investors to continue investing in dividend-oriented investments but with the added benefit of global diversification.”

Management firm ABN AMRO is already overseeing IA Clarington’s stable of Target Click balanced funds, a series of “life-cycle funds” that can be selected by investors according to desired maturity dates. (ABN AMRO’s Canadian asset-management subsidiary was recently ranked by Bene-fits Canada as one of the five fastest-growing Canadian pension fund managers.)

Foreign equity sales have picked up across the fund industry, turning positive during the past seven months. The category had been in net redemptions for 21 consecutive months, according to data from the Investment Funds Institute of Canada. The removal of foreign-content restrictions on RRSPs, as well as Canadians’ growing desire to diversify beyond their domestic market, are contributing factors to the appetite for foreign exposure.

“The Canadian market is focused on a few sectors — including financials, resources and materials — and tends to be cyclical,” Frape says. “It has had a good run for the past few years, but the recent volatility in oil prices has led investors to the realization that it’s good to have diversification across industries and geographical regions.”

In addition to the lineup changes, IA Clarington plans to bring management of Clarington Diver-sified Income and Clarington In-come Trust funds in-house, thereby removing responsibility from KBSH Capital Management Inc. of Toronto, a subsidiary of Rockwater Capital Corp. The investment objectives will not change, Frape says, but a more cost-efficient fee structure will be realized. “We are making some changes, but continue to believe in the benefits of a multi-manager family of funds and the subadvisor concept,” he says. “We are able to offer our clients global diversification and access to some of the world’s top money managers.”

@page_break@IA Clarington intends to reduce the annual management fees on Series A units of Clarington Diversified Income Fund and Clarington Income Trust Fund by 10 basis points, which will result in management expense ratios of about 2.4% and 2.5%, respectively. The MER on Series A units of Clarington Global Equity will be reduced by 27 bps to about 2.5%.

IA Clarington has also decided to close IA Crystal Enhanced Index America Fund and Clarington Canadian Resources Class on or shortly after Nov. 17, because of their small size and the company’s view that their growth potential is limited. Each fund has less than $3 million in assets. The purchase of new units in the funds is frozen, but investors may redeem or switch their units until Nov. 17.

Provided all proposed changes are approved, the revamped $6.6-billion IA Clarington fund family will include 37 funds, not counting multiple series and classes. IE