Montreal-based investment manager Letko, Brosseau & Associates is launching eight mutual funds.Graham Hughes/The Canadian Press
Montreal-based investment manager Letko, Brosseau & Associates Inc. is launching eight mutual funds as it makes its first foray into serving retail investors after decades spent focused on institutional money managers.
The new funds will be managed with “substantially” the same investment approach and team as LetkoBrosseau’s institutional strategies, the company said in a statement.
The eight funds will be offered through investment advisers and represent most of LetkoBrosseau’s largest investment strategies, accounting for most of its $22.5-billion in assets under management.
Letko Brosseau, which is independently owned and will celebrate 40 years in business in 2027, has about 170 large institutional clients such as pension funds, endowments, and non-profits, as well as some high-net-worth investors and families.
The retail market that the company is now targeting is “super competitive,” executive vice-president David Després said in an interview. LetkoBrosseau will face a stiff challenge trying to break in as a late arrival, especially as growth in retail investment funds has lately been dominated by low-cost exchange-traded funds (ETFs).
Even so, the mutual fund market in Canada is still large and lucrative. It is worth $2.7-trillion, which rivals the pool of pension fund assets that LetkoBrosseau caters to.
The country’s eight largest pension funds collectively manage about $2.6-trillion.
LetkoBrosseau is aiming to carve out a niche by offering actively managed, highly tailored funds with a focus on preserving capital, at a cost that is “very close” to many active ETFs that have hands-on portfolio managers, Mr. Després said.
“For us, it’s just a natural extension of what we’ve been doing over the first four decades,” he said. “This venture is not driven by the need to win assets or market share. … We are super well financed. We have no debt, a lot of capital. And the company has always been managed for the long run.”
To show its track record, LetkoBrosseau obtained an exemption from the Canadian Securities Administrators and the Autorité des marchés financiers to disclose the past performance of its funds to investors.
LetkoBrosseau’s Canadian Equity Fund, for example, has gained 15.2 per cent annually over five years and 11.7 per cent annually since its inception in 2017, with a management expense ratio of 0.71 per cent, according to company data.
“We think that this will resonate well with advisers, how we do things, and also in the context of the need for adding more transparency around fees,” Mr. Després said.
One reason LetkoBrosseau chose to launch mutual funds, rather than ETFs that trade as securities on stock exchanges, is because “you don’t really know who’s buying your ETF,” he said. The company wants to have a more robust dialogue with investment advisers to make the case for its funds and the research that underpins them.
LetkoBrosseau has built a sales team to reach out to advisers and pitch its mutual funds, and it will likely rely on some third-party distributors to expand its reach. Eventually, Mr. Després said, he hopes that mutual fund clients will make up a “meaningful portion” of the assets the company manages.
In a market in which independent players have rapidly vanished, snapped up in many cases by major banks, LetkoBrosseau is planning to highlight its independence to stand out. The company was co-founded in 1987 by Peter Letko and Daniel Brosseau, whose families are still the major shareholders.
Mr. Letko and Mr. Brosseau have been leading voices in a campaign to convince some of Canada’s largest institutional investors, including its major pension funds, to invest more in Canada.
“We are domestic, independent, employee-owned,” Mr. Després said. “These features are enabling us to think for the long term, without adding any conflict of interest.”
Editor’s note: This article has been updated to clarify that Letko Brosseau has about 170 large institutional clients, in addition to some high-net-worth investors and families.