As the 1970s wound to a close, BENEFITS CANADA’s list of Top 40 Money Managers was dominated by big trusts and insurance companies. Today, few of the top ten of 1979 even exist in their current form, having been scooped up by others during various mergers and acquisitions.

Back in 1999, for instance, the change in the foreign property rule—bumped up to 30% from 25%—had some in the industry looking for major changes in the money management landscape in Canada especially as U.S. players began to move north. The 2000 Top 40 report focused on the big deals that had swept through the industry as globalization shaped the firms on the list. In particular, that year saw a major deal between one of the most successful Top 40 firms, Perigee Investment Counsel Inc. in Toronto and U.S. firm Legg Mason in Baltimore, Md. Today, Legg Mason takes the 20th spot on the list, while the Perigee name is no longer there.

Among the other new U.S. firms to move onto the Top 40 list since 2000 is Brandes Investment Partners in San Diego, Calif. Leah Brock, senior vice president of marketing, notes that the firm’s expertise as a global equity value manager has attracted attention from Canadian plan sponsors. Brandes’ presence on the list reflects the increased importance of global investment managers in Canada. Says Brock, “the appetite for good managers has driven Canadians beyond borders as they seek the best.” Looking forward, it’ll be interesting to track the progress of new global firms on the list, particularly now that the foreign property rule has been eliminated altogether.

Brandes’ appearance on the list also marks another notable trend among newcomers—the rise of specialist managers. This trend has been driven by alpha-hungry plan sponsors seeking to add value in a tough environment. Active management wasn’t top of mind back 1997 when the Top 40 report pointed out pension assets had ballooned by 29% and passive managers were on the rise. However, tables turned just a few years later and, by the time the 2002 list came out, pension assets had grown a paltry 3.5%. Indeed, most firms actually saw decreases in pension assets and growth that year. Says Benoit Durocher, president and chief operating officer at Montreal-based Addenda Capital, falling interest rates, the increased significance of liabilities and an about-face in the return environment have all contributed to a widening funding gap. And that has made room for more active, specialist managers like Addenda to move onto the list.

“Generating decent returns from a passive approach gets difficult,” says Durocher. “Active management is on the rise as plan sponsors seek to add value.” Addenda’s niche as an active fixed income manager has served it well since it appeared on the Top 40 list in 2000. Durocher says active duration managers are few and far between in Canada and, since fixed income is becoming increasingly important given all the challenges in the environment, his firm has done well. This year it broke the top 10.

Other specialists are on the rise, too. In the last two years, for example, Northwater Capital Management in Toronto has appeared among Canada’s top money managers. Their presence indicates the growing importance of alternative investments among plan sponsors—an approach that wasn’t reflected at all on the list 25 years ago.

In 1997, a 59% jump in pooled fund assets signaled the beginning of another new era on the Top 40 list—the rise of capital accumulation plans(CAP). The move on the part of many plan sponsors from the defined benefit model to CAP and defined contribution plans has kept providers of pooled funds and other tools and resources moving ahead. Judith Lowes, vice-president, investment services, with Co-operators Investment Counseling Ltd. in Guelph, Ont. notes that, while the big insurance companies that dominated the industry in the 1970s began to lose ground, the rise of defined contribution plans has brought some of them back onto the list. With their capabilities in recordkeeping, for example, insurance companies have come into their own once again as providers of defined contribution plans.

And just as the traditional balanced managers from the early days of the Top 40 list have gradually given way to new and diverse types of management, the trend to balanced is coming back. Notes Lowes, balanced mandates are on the rise once again: “there’s a lot of cyclicality in the industry,” she points out. Cyclicality has also kept bringing Co-operators back onto the list after brief absences in line with industry trends.

Looking ahead, it’s hard to say which new trends will evolve. As more and more plan sponsors look at balanced mandates, the list could come full circle with the Top 40 managers looking a lot like they did in 1979. Or specialist managers in new and emerging areas could continue their rise. Whichever way the list moves, it’s certain that newcomers will continue to act as bellwethers for trends to come.

Caroline Cakebread is the editor of Canadian Investment Review.