By Rudy Luukko | 19/02/16

With this week's completion of Canoe Financial's acquisition of the former O'Leary family of mutual funds, the O'Leary brand name is gone. So too, in the near future, will be most of the 14 former O'Leary mutual funds.  Ten of the funds are being merged into mutual funds managed by Canoe between April and July of this year. The Canoe takeover and pending mergers have received regulatory and investor approval.

About the Author
Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

Launched in 2009, Montreal-based O'Leary Funds Management was co-founded by its colourful namesake, television personality and entrepreneur Kevin O'Leary, and Connor O'Brien, who was president and CEO of O'Leary Funds, as well as president and chief investment officer of Stanton Asset Management Inc., the O'Leary funds' portfolio manager.

Before its acquisition of O'Leary funds, Calgary-based Canoe managed about $3 billion, of which $1.6 billion was in mutual funds. The former O'Leary mutual funds raise that total by about $750 million. In addition, about $100 million in four closed-end O'Leary funds will be merged into Canoe mutual funds. It all adds up to a roughly 50% increase in assets for the Canoe fund family, bringing it to the $2.5-billion range.

While Canoe remains small compared to the industry's giants, the O'Leary deal will bring improved economies of scale. Any savings to investors will be modest, however, since no changes in management fees were announced.

Lack of critical mass, which translated into high management expense ratios, contributed to the mostly poor relative performance of the O'Leary funds. Of the 12 funds with long enough track records to receive a Morningstar Rating, two are rated three stars as of Jan. 31, an average rating, and another two have a sub-par rating of two stars. The remaining eight rated funds earned the lowest Morningstar Rating of one star.

The two funds with average Morningstar Ratings are the former O'Leary Canadian Bond Yield, the largest fund in the family with $143 million in assets at the end of January, and the former O'Leary Canadian Dividend. These 3-star funds have been renamed Canoe Canadian Corporate Bond and Canoe Canadian Dividend.

A third surviving fund, previously focused on global infrastructure, has been recast by Canoe as the more broadly based Canoe Global Balanced.  The only other mutual-fund survivor from the O'Leary family is Canoe Floating Rate Income, for which Aegon USA Investment Management has been appointed as the portfolio sub-advisor.

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