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Jul 10, 2018

TD Asset CEO says Greystone acquisition fuelled by lower rate environment

Greystone’s alternative investments help amid lower rates: TD Asset Management CEO

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Toronto-Dominion Bank will buy Saskatchewan-based Greystone Managed Investments Inc. for roughly $792-million in stock and cash, a transaction which the bank says makes its asset management division the biggest money manager in Canada.

Acquiring the institutional money manager will add another $36 billion in Canadian assets under management and expertise in alternative investments including real estate, mortgage and infrastructure.

The proposed takeover will help TD expand into key areas at a time when interest rates remain relatively low, TD Asset Management CEO and CIO Bruce Cooper said in an interview with BNN Bloomberg’s Jon Erlichman.

“In the big picture we think interest rates are going to remain relatively low and for savers, that’s going to create a challenge: Where do I put my money that generates a return?” Cooper said.

“That thought process was very much a part of this [deal]. We think that investments in real estate or infrastructure – which can generate solid returns and solid income yields above what you can get on say, a Government of Canada bond – that will remain an attractive proposition.” 

The asset management sector in Canada is in a consolidation phase with privately held firms being snapped up amid heightened competition.

In March, the Bank of Nova Scotia announced a $950-million deal to buy Montreal's Jarislowsky Fraser investment firm to create the third-largest active money manager in Canada. In January, Sun Life Global Investments completed its acquisition of Excel Funds Management Inc. and Excel Investment Counsel Inc., which specializes in emerging markets funds.

The proposed transaction between TD and the Regina-based money manager's parent company Greystone Capital Management Inc. will bring total assets under management at the bank to $393 billion, making it the largest player based on assets based in the country, TD said.

The transaction is expected to be completed in the second half of 2018, subject to approvals and customary closing conditions.

McCreath: Greystone has a distribution advantage, is a good acquisition for TD

BNN Bloomberg Commentator Andrew McCreath weighs in on TD Bank acquiring Greystone Managed Investments for $792 million. He also says redemptions are going to continue to haunt CI Financial, and discusses how oil is continuing to defy a higher U.S. dollar.

Under the deal, shareholders of Greystone Capital will receive 30 per cent of the purchase price in TD common shares, with the remainder payable in cash.

Greystone shareholders will have the ability to elect to increase share portion of the payment up to a maximum of 50 per cent of the total payment.

Greystone, which has nearly 200 employees, will be rebranded as TD Greystone and will continue to operate from Regina.

"Joining forces with TD will add tremendous value to Greystone clients interested in expanding and diversifying their investment portfolios," said Greystone's chief executive and chief investment officer Robert Vanderhooft in a statement.

The acquisition comes at a time when the wealth and asset management space is not only facing fierce competition from other players, but also from increased interest in self-directed investing, robo-advisers and other products with lower fees such as exchange-traded funds.

TD is aiming to launch a "robo-guidance" product, which won't make recommendations, but can be used to create sophisticated portfolios, by the end of this year, Leo Salom, TD's group head of wealth management and TD Insurance said. A follow to that launch will be a robo-advisor platform where clients provide information about risk tolerance and timeline and receive recommendations, he added. The bank is partnering with U.S. firm Hydrogen on these products, Salom added.

TD's direct investing online platform WebBroker is seeing a surge in demand from self-directed retail investors. The bank recently completed a $100-million revamp of its WebBroker and mobile trading assets over the past 18 months, said Salom.

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Yet, at the end of 2017 and early 2018 the platform was plagued with outages amid a spike in trading activity.

A flurry of interest in the pot sector helped to drive trade volumes up by more than two times during that period, said Salom.

"Interest in cannabis by mainstream investors, but also particularly a new generation of investors that wanted to participate in the growth of the industry... created some capacity challenges for the entire industry, and we were not immune to it," he said.

Interest from investors continues to rise as Canada prepares to legalize cannabis for recreational use on Oct. 17.

TD last month expanded its approved list of cannabis stocks its staff are allowed to recommend from three to 19. The "eligible for solicitation" list originally included licensed producers Canopy Growth Corp., Emerald Health Therapeutics and Emblem Corp. It has been expanded to include MedReleaf Corp. and the Hydropothecary Corp., and others, but not Aurora Cannabis or Aphria Inc., two of the largest licensed producers in Canada.

TD does not restrict clients from investing in certain marijuana stocks, but does not want its advisers to offer certain stocks without a certain level of due diligence first, Salom said. The bank is concerned about cannabis firms' operations in the U.S., he said, where pot has been legalized in several states but remains illegal at the federal level.

"We are a North American bank and we have certain obligations to our regulators on both sides of the border," said Salom.

With files from BNN Bloomberg


WEALTH MANAGEMENT M&A

Toronto-Dominion Bank announced it is acquiring Greystone Managed Investments for US$792 million on Tuesday. Here’s a look at other recent wealth management takeovers by Canada’s big banks.

May 31, 2018 - Bank of Nova Scotia agrees to buy MD Financial Management for $2.59 billion:  MD Financial provides planning, insurance, banking, investment, and estate and trust services to Canadian doctors and their family members, and has more than $49 billion in assets under management.

Feb. 12, 2018 - Bank of Nova Scotia agrees to buy Jarislowsky Fraser for $950 million: The Canadian investment manager founded by billionaire Stephen Jarislowsky six decades ago adds more than $40 billion in assets on behalf of institutional investors and high-net-worth clients to Scotia’s portfolio.

Jan. 22, 2015 - RBC agrees to buy City National for US$5.4 billion: Los Angeles-based City National specializes in high-net-worth clients and lending to the entertainment, technology and health care industries.

- BNN Bloomberg