Barry McInerney is a veteran business executive who has spent more than 25 years leading various global asset-management businesses. Now, McInerney, newly appointed president and CEO of Toronto-based Mackenzie Financial Corp., is keen to bring global innovations to Mackenzie’s product lineup.

This includes reaching beyond traditional stocks and bond products to introduce “liquid alternative” strategies – such as limited short-selling and leverage – to retail investors who have smaller accounts. Investments could include real estate, derivatives, infrastructure and commodities.

Investors can achieve better risk-adjusted, long-term results, he says, by broadening the investment field and adding non-correlated asset classes and hedging strategies to a diversified portfolio. Investors can meet their investment goals while tempering the dramatic volatility that might steer them off course.

“There are investment products and solutions globally that could be of interest to Canadians and make for a better investment journey,” says McInerney, 53, who took up the reins at Mackenzie in early July after leaving his New York post as co-CEO of Toronto-based BMO Global Asset Management Inc. (BMOGAM).

Alternative strategies have been primarily the domain of hedge funds or large institutions that are not constrained by mutual fund prospectus restrictions. Typically, these strategies are difficult for individual investors to access on their own, and individuals often don’t have the financial heft to achieve adequate diversification. However, Mackenzie plans to make these strategies available in legally acceptable form through prospectus-sold mutual funds that can bring them into reach for retail investors who have smaller accounts.

Preserving capital

Mackenzie has taken a step along this path with the introduction about a year ago of Mackenzie Diversified Alternatives Fund, McInerney says, and his goal is to offer more products of this type.

The diversified alternative fund holds a broad mix of real estate, infrastructure, emerging-market debt, micro-cap equities, high-yield bonds, currencies, preferred shares and commodities. The fund also may hold units of a sister fund, Mackenzie Unconstrained Fixed Income Fund.

“[Retiring] baby boomers want absolute-return products, and they’d rather preserve capital and have steady returns than beat their neighbour,” McInerney says.

In addition to baby boomers, Mackenzie is also considering the needs of other demographic groups, such as tech-savvy millennials and the fast-growing group of women of all ages who are taking charge of their own investment decisions.

“If you project out a decade, women will control the majority of investment wealth,” McInerney says.

Women’s concerns include managing longer lifespans than men. Research shows women are interested in socially responsible investments, a sector that also attracts millennials. Millennials also like the convenience and low fees of exchange-traded funds (ETFs). Mackenzie is looking at developing products in both categories.

With ETF assets under management (AUM) totalling $107 billion in Canada – far behind the US$2.5 trillion in the U.S. – McInerney envisions ample growth potential in Canada. Mackenzie entered the world of ETFs earlier this year with the introduction of a family of actively managed and strategic beta ETFs that has grown to nine fixed-income and equities-based offerings. The company plans to introduce more individual ETFs, as well as ETF portfolio solutions, McInerney says. Alongside every ETF launched by Mackenzie, the company has a corresponding mutual fund that invests in the underlying Mackenzie ETF, thus making the ETF strategy available to financial advisors who cannot trade ETFs.

With 10 investment-management teams providing 119 mutual funds under the Mackenzie umbrella, there is potential to call upon a deep pool of investment expertise in developing future ETF products. Mackenzie also has access to third-party investment expertise: five Mackenzie ETFs are subadvised by TOBAM SAS, a Paris-based index provider and asset manager.

TOBAM employs a quantitative strategy in selecting equities investments and enhancing diversification, a strategy McInerney refers to as smarter smart beta.

“Often ETFs and mutual funds work well side by side – clients can mix and match or use both,” he says. “We’re a holistic asset-management firm: we offer ETFs, mutual funds, pooled funds and separately managed accounts. We are agnostic as to which delivery vehicle clients use to access our investment expertise.”

McInerney doesn’t rule out a relationship through which Mackenzie could act as a provider to its parent, Montreal-based Power Financial Corp., which has invested in Wealthsimple Financial Inc., a robo-advisory service. ETFs are an economical product fit for bare-bones robo-advisor platforms.

Ambitious plans

“We have ambitious growth plans in Canada, and are always looking for ways to accelerate with new capabilities, products and client relationships,” McInerney says. “We have a variety of investment boutiques and can innovate with them, and a financially strong parent in Power Corp.”

McInerney originally began his career in 1987 as an actuarial analyst in the pension consulting business in Toronto, qualifying as an actuary in 1989. He moved into investment consulting in the early 1990s, becoming national practice leader at consulting firm Mercer (Canada) Ltd. in 1998. In 2001, he was transferred to New York and became president of Mercer’s U.S. investment consulting arm. In 2003, he initiated and oversaw the launch of Mercer’s global asset-management business, Mercer Global Investments, for which he became president, overseeing operations from New York.

In 2006, McInerney joined Russell Investments Group as managing director, Americas institutional, in New York, overseeing the institutional asset management and consulting businesses of Canada and the U.S. In 2009, he became CEO of BMOGAM, U.S. and international, in Chicago. In addition, he was appointed co-CEO, global, sharing that title with Rajiv Silgardo, head of BMOGAM in Canada. McInerney held this position until moving back to Toronto to assume his new position at Mackenzie this year.

He will face the challenge of achieving growth at Mackenzie in a challenging investment environment and a fiercely competitive industry. Mackenzie, like other independent fund- management giants, has struggled to grow in recent years as bank-owned firms take advantage of built-in branch networks and widespread brand identification to sell investment products.

In addition, regulatory initiatives, such as the client relationship model, phase 2, which requires detailed reporting on fees and performance in dollar terms, are leading to clients’ increased scrutiny of costs and returns.

Mackenzie’s AUM of $64 billion is down from $69 billion two years ago, and the company has been fighting to turn net redemptions into positive net sales. The four pillars of Mackenzie’s strategy are: competitive performance and risk-adjusted returns; relevant and innovative products; brand awareness; and strong retail and institutional distribution.

Solutions include providing support in such areas as tax and estate planning, understanding regulatory changes and establishing charitable-giving plans.

“Market share gain is necessary to grow the way we’d like to grow in this environment,” he says.

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