In a move the company says is a natural extension of its existing business, Empire Life quietly entered the mutual fund company space with the launch of its new business, Empire Life Investments.
The new company was formed late in 2011 and began sales in early January. Drew Wallace, the newly minted president and CEO, says this, in part, is a response to demand from the company’s existing distribution partners. As well, as part of a broader risk management strategy, having an investment arm with a lineup of portfolios and mutual funds to bolster its existing segregated fund lineup, will allow the company to build up its assets under management.
“You see what we’ve been through over the last number of years as an industry in terms of down markets and their implication on seg fund guarantees. We’ve weathered that exceptionally well but we believe we can strike a more appropriate balance with the two offerings,” he says. “We’re taking the long-term view. We believe the time is absolutely perfect for us to launch.”
Already, he says Empire has over 20 segregated funds that are managed internally. The new company will add five mutual funds and five portfolios to that lineup to start. While the funds are managed according to more traditional mandates – Canadian equities or small-cap equities, for example – the portfolios are managed according to targeted risk mandates. These include a conservative portfolio, a balanced portfolio, moderate growth, growth and aggressive growth portfolios.
The “soft launch” of this new fundco follows on the heels of a strategic review the company conducted over two years ago. In examining its employee benefits division, individual insurance business lines and its wealth management platform, it was decided that an effort should be made to grow the latter. “It’s a transfer of our existing capability,” he adds. “This is a significant investment in our overall wealth management platform.”
Reflecting this initial strategic work, the company underwent a rebranding exercise in 2011, introducing its new “visual identity” and engaged the services of Citi late in the year to deliver transfer agency, fund administration, custody and securities lending services for the new funds and for some of the company’s existing seg fund business.
Empire does not want to disclose assets under management for the new mutual fund company since operations are still in the early start-up stages.
Although Citi is taking care of administration, Empire manages its segregated funds and new mutual funds in-house. Mr. Wallace says the company uses a conservative, value-oriented discipline. Although it might expand on its existing Canadian equity and fixed income capabilities, he says there are no plans to blow out or rapidly expand the company’s initial product lineup. “It is not our intent to come to market every few months with a new offering.”
At the moment, roughly 80 per cent of Empire’s distribution comes from managing general agencies, followed by national account distribution on the part of dually licensed IIROC or MFDA firms and relationships that Empire has with independent agents. “We have been in segregated funds for over 45 years. They’ve all been managed internally. We are now looking to (expand) that in a very focused fashion.”