Mackenzie Financial Corp. expects to add some sales enhancements to the Saxon line of mutual funds that will soon become part of its lineup, with the aim of making the funds more attractive to advisors and their clients.

The friendly $287-million acquisition of Saxon Financial Inc. of Toronto by Mackenzie’s parent, IGM Financial Inc. of Winnipeg, is expected to close by the end of September. The takeover will see Saxon and its $2-billion family of 12 retail mutual funds become part of Toronto-based Mackenzie.

Saxon’s $11 billion in institutional assets under management will be integrated with Mackenzie’s institutional arm, providing a stronger platform for developing the institutional side of Mackenzie’s business, says David Feather, president of Toronto-based Mackenzie Financial Services Inc.

Saxon’s funds and institutional assets will continue to be managed by Toronto-based Howson Tattersall Investment Counsel Ltd., he Saxon subsidiary headed by experienced value managers Richard Howson and Robert Tattersall.

Although Saxon has made a determined effort over the past couple of years to penetrate the advisor channel with a load-fund series, competitive trailer fees and F-class funds for fee-based advisors, the bulk of Saxon’s sales have historically been through discount brokers or directly to individual investors. Saxon has made few inroads with advisors, despite a strong long-term performance record, perhaps, because it has not offered deferred-sales or a low-load versions of its funds. This will change once the funds are merged with the Mackenzie family.

“We will be offering low-load and DSC options on Saxon funds — to make them consistent with the options that are offered across the Mackenzie family,” Feather says. “The funds will have the same pricing and trailer fee choices as the rest of the Mackenzie family.”

Adding the DSC and low-load options improves the attractiveness of the Saxon funds for a wider range of investors. The DSC option is often the most suitable for small accounts or for young investors who may need the incentive of avoiding the redemption fee to “stay the course” during difficult markets, Feather says. He is not anticipating any increases in management expense ratios on the Saxon funds, and says that if anything, there could be a lowering of MERs once the funds become part of the Mackenzie group.

“Saxon had been finding it difficult to get into the highly competitive advisor channel, and its roots are not in that business,” says Mark Chow, senior fund analyst with Morningstar Canada in Toronto. “Mackenzie has been cultivating those advisor relationships for a long time.”

Mackenzie will continue to offer the “investor series” of Saxon funds, which are intended for self-directed investors who do not require the services of a financial advisor, but Mackenzie will not be devoting any resources to promoting this line of funds.

“We respect the fact that a small number of Canadians have chosen to buy their funds directly, and it will be business as usual with the Saxon no-load funds,” Feather says. “However, Mackenzie’s key focus remains the advisor channel. We believe in the value of advice, and the advisor channel is the bread and butter of our business.”

Saxon’s bread and butter accounts have been historically on the institutional side of its business, where the majority of its assets lie. About 70% of Saxon’s AUM are managed on behalf of Ottawa-based CMA Holdings Inc. a private company fully owned by the Canadian Medical Association, which until the takeover, was Saxon’s major shareholder. Through subsidiary MD Financial Group and its network of advisors, CMA provides financial products and advice to its physician members.

“The close relationship with the CMA and Saxon gives Mackenzie access to a desirable distribution channel, and another avenue for selling its funds and picking up assets,” says Dan Hallett, president of Windsor, Ont.-based industry analyst Dan Hallett & Associates Inc. “With 50 branches across Canada, MD Financial is not an insignificant channel, and the clients tend to be affluent.”

Until now, Mackenzie has not “made much of a footprint on the institutional side,” Hallett says, and Saxon’s strength in this area is another attraction of the acquisition.

“Mackenzie now has a stronger threshold on the institutional side,” Feather says. “It’s better diversification for the company to be strong in both institutional and retail. Saxon and Mackenzie can learn from each other.”

@page_break@The Saxon brand will be kept alive in the same way that the Cundill brand has remained intact within the Mackenzie empire. The complete line of Saxon funds will be offered under the Mackenzie Saxon name and will also become part of multi-fund Mackenzie products, such as Star and Symmetry. Saxon funds are already on the Keystone multi-fund platform.

The Howson Tattersall name will continue to be used for institutional clients. Saxon president Robert Tattersall, 60, and chief investment officer Richard Howson, 57, have a contractual arrangement to remain in charge of the Howson Tattersall team until at least 2010. Feather would be pleased if they stayed on even longer. The pair of veteran managers were responsible for developing Saxon’s disciplined value investment style and solid long-term track record. In recent years, they have been planning for succession and adding new members to their team, including Canadian equity manager Suzann Pennington, global manager Carmen Veloso and small-cap expert Scott Carscallen.

“The two founders of the business have built a team of good investment people who have a lot of experience,” Feather says. IE