The March issue of Insight updates and expands the research Investor Economics published in July 2004 on the use of sub-advisors by Canadian mutual fund companies. We look at both in-house investment managers and external managers, highlighting a trend toward using managers who are external but affiliated. We also provide a list of the manager changes that were made last year and thus far this year.
As with so much else in the mutual funds industry, vertical integration remains the key driver for developments in the sub- advisory world. The dollar value of sub-advised assets has grown, due in large part to market conditions. But the number of mandates has diminished. There were 183 sub-advisors in 2001, but just 160 at the end of last year—the same number as now.
Whether sub-advisors are in or on the way out, fund companies are stepping up pressure on them to lower fees as the fund companies themselves feel more pressure to shave MERs.