When danny bubis, president and chief investment officer of Winnipeg-based Tetrem Capital Partners Ltd. was named lead manager of CI Canadian Investment Fund last month, Tetrem became the 14th-largest mutual fund company in Canada.

With the addition of the CI fund’s $6.7 billion in assets under management to the $1.8 billion Tetrem already oversees, Tetrem’s AUM balloons to $8.5 billion, slotting it in front of Manulife Investments ($8.28 billion in AUM), AIC Ltd. ($8.18 billion) and National Bank Mutual Funds ($7.37 billion) in the Investment Funds Institute of Canada rankings, according to Sept. 30 figures.

It’s a nice position to be in. But going from managing $1.8 billion to more than $8.5 billion in the blink of an eye presents a big challenge for Bubis and his team.

“It would be tough for it not to have an impact,” says Dan Hallett, fund analyst and president of Dan Hallett & Associates Inc. of Windsor, Ont. “Bubis may not be able to buy smaller or mid-cap stocks; he may not be able to trade as often; or he may have to go outside of Canada more than was otherwise the case.”

Bubis, formerly the chief investment officer at Assante Corp. , says there is no doubt the addition of Canada’s oldest and largest Canadian equity fund quickly takes his 2.5-year-old firm to the next level.

“We think this is a tremendous endorsement of what we have created at Tetrem,” he says.

Bubis formed Tetrem in the spring of 2004 together with a trio of other Assante alumni. Its first client was Assante, which had been acquired by the predecessor company to CI Fund Management Inc. in 2003. In May 2004, Tetrem signed on to become the subadvisor to Optima Strategy Canadian Equity Value Pool, Canadian Equity Segregated Accounts, U.S. Equity Segregated Accounts and Global Voyager North American Equity Pool. They were the same $1.5-billion worth of mandates Bubis managed at Assante. Today, those investment funds are offered by CI under the United Financial Corp. banner.

That’s why Bubis’s appointment wasn’t a big surprise, says Hallett: “He’s technically an external selection, but he’s about as close to internal as you can get. He certainly seems to be the best fit of all the in-house choices that CI had. His track record implies he’s quite good at what he does.”

(United Canadian Equity Value Pool Fund, the biggest fund Bubis manages, had a return of 7.2% for the year ended Sept. 30, and an average annual compound return of 14.9% for the 10 years ended Sept. 30. The S&P/TSX composite index had a one-year gain of 15.6% and an average annual gain of 10.8% for the 10-year period.)

CI Canadian Investment Fund’s previous manager, Kim Shannon of Sionna Investment Managers Inc. , who is joining Brandes Invest-ment Partners LP (see page 12), is a well-known value manager. Bubis describes his investment philosophy as “contrarian value,” with a bottom-up approach to stock selection.

“We believe in reversion to the mean,” he says. “Profitability and stock valuations tend to be mean-reverting. We believe markets are reasonably efficient except at the extremes; that’s where they break down. People tend to put too high a value on a rosy consensus and too low a value on investment controversies. Our process is to arbitrage that and make money.”

Bubis and his team look for firms with low valuations, good earnings quality and management with solid capital discipline, such as a propensity to buy back stocks or increase dividends. Tetrem’s 10-person shop includes six investment professionals who handle portfolio management, research and analysis, plus four support staff.

Although there will be minor changes in how the CI Canadian Investment Fund portfolio is run, Bubis says, unitholders won’t be in for any major surprises. He describes his transition plan as “‘three yards and a cloud of dust’ investing, as op-posed to any Hail Mary passes.

“That’s in four-down football, of course,” he adds. “We want to make first downs, not kick punts.

“It’s already a pretty good portfolio,” he says. “We’ll be increasing foreign content in a gradual and opportunistic manner from the current level of about 10%.”

Bubis says the portfolio will be slightly more diversified than it is today, with exposure to between 35 and 55 stocks. And it will have slightly lower turnover and a higher minimum market capitalization.

@page_break@“We definitely won’t invest in anything with a market cap less than $1 billion,” he says.

William Holland, CEO of CI, is unconcerned that Bubis is not widely known outside Assante circles. “He probably has the top 10-year record of any major fund in the country,” he says. “His management style is very similar to Kim Shannon’s. [Promoting him to the post] was one of the more obvious decisions to make.”

As for moving the fund from Bay Street to Portage and Main, Bubis says, that’s fine. He feels no obligation to relocate to Toronto. He will continue to operate from his office in the CanWest Global Place tower in downtown Winnipeg.

“There is an advantage to being a money manager in Winnipeg,” he says, doing his best impression of another famous money manager based in the Manitoba capital, Larry Sarbit. “If you’re too close to Bay Street, it’s too difficult to separate fact from conjecture. One of the most important skills of a money manager is to filter information. It’s easier to do that from Winnipeg.”

One thing for certain is that Bubis is now in a different stratosphere among money managers.

“I suspect he can pretty much talk to any senior manager at any company in Canada,” Hallett says. “That’s what you get access to when you have discretion over that much money.” IE