Legg Mason Inc. plans to bid for Royal Bank of Canadas institutional money management arm, a spokeswoman said late last week.
The Baltimore asset manager has been looking for 18 months for acquisitions or partners to expand its Canadian market share, the spokeswoman said Thursday.
It started looking at RT Capital, Canadas third-largest pension manager, in December, when Royal Bank of Canada put the unit up for sale, she said.
Several U.S. asset management companies have recently taken steps to expand distribution in Canada, where fund sales have been strong despite the plunge in U.S. markets.
Net Canadian sales of mutual funds grew 12% last year, according to the Investment Institute of Canada in Toronto. The U.S. rise was only 2.2%, according to the Investment Company Institute in Washington.
Indeed, March sales in Canada more than doubled Januarys, the Canadian trade group reported.
Fund companies are at a plateau in the United States, and American companies are looking abroad, said Geoffrey Bobroff, a mutual fund consultant in Providence, R.I. Canada is ideal because you have proximity, a common language, and similar distribution. Canada allows a fund company to go global while still being close to home.
Analysts said other U.S. asset managers are also likely to bid for RT Capital. Many U.S. banks and fund companies, they say, want to expand into Canada because its pension and mutual fund market is large, unsaturated, and bullish.
Kim Flood, the director of external communications for Fidelity Investments Canadian unit, said, The Canadian market is very hot right now, and it is important for everyone to get as much market share as possible as quickly as possible.
Kish Kapoor, the executive vice president of Winnipegs Assante Asset Management Ltd., said the northern migration by U.S. companies is long overdue.
Canada has to become part of the global landscape, he said. We are looking for partners in the United States and they are looking to scale larger by pairing with us. This is just natural.
RT Capital would not be Legg Masons first foray into Canada. Last May it bought Perigee Investment Counsel Inc. of Toronto for $218 million in stock. And in November it bid unsuccessfully for Torontos Mackenzie Financial Corp., Canadas fifth-largest mutual fund manager. (The winning bidder for Mackenzie was the nations largest asset manager Investors Group Inc. of Winnipeg, with $41 billion of assets under management which bought it in January.)
Last years biggest purchase of a Canadian fund firm by a U.S. company occurred last April, when a unit of Houston-based Aim Management Group Inc., bought Torontos Trimark Investment Management Inc. The deal made Aim Canadas second-largest asset manager, with $35 billion under management.
The Trimark and Mackenzie purchases left few publicly traded Canadian fund companies looking for buyers, said Jim Hunter, president and chief executive officer of Investors Groups Mackenzie unit. That scarcity makes subsidiaries, such as RT Capital, better targets, he said.
But the reality is, with the market good in Canada, very few people are looking to sell, Mr. Hunter said. This makes the ones that are selling worth that much more.
