Seif Aims to Top Claymore’s $7.5 Billion in Assets

Som Seif built Claymore Investments Inc. into an exchange-traded fund powerhouse in Canada with C$8 billion ($7.5 billion) in assets before selling it to BlackRock Inc. He says his encore will be even bigger.

“We can do it faster,” Seif said in an interview at the Bloomberg News Toronto office. “We have a lot of credibility for what we did in the past but more importantly people are focused on what this offering is doing for them.”

Seif started Toronto-based Purpose Investments Inc. in September to sell ETFs and mutual funds to institutional and retail investors. The firm has accumulated almost C$600 million in assets as of July 2 and is averaging about C$2.5 million a day in net sales, he said.

By contrast, it took Seif, 38, four years to raise C$1 billion at Claymore, which was Canada’s second-biggest ETF provider before he sold it to BlackRock’s iShares Canada ETF unit, the No. 1 seller, in 2012 for an undisclosed sum.

“Once you’ve done it once, you have the confidence he can do it again,” said Frank Maeba, managing partner at Breton Hill Capital Ltd., on the growth potential of Purpose.

Breton Hill, a Toronto-based hedge fund firm, worked with Purpose to develop the investment engines that power its ETFs. The quantitative models rate stocks across a series of factors including net income and cash flow.

“Instead of going to a third-party index provider, we’re doing it with our own intellectual capital,” Seif, 38, said. “What we just don’t do is go to an index provider and license an index.”

Fee Competition

About two-thirds of Purpose’s sales have been ETFs and the rest mutual funds, Seif said.

Seif doesn’t shy away from picking stocks in his funds. The Purpose Core Dividend Fund dropped its investment in BCE Inc., Canada’s biggest telephone company, and RioCan Real Estate Investment Trust, while adding positions in food companies George Weston Ltd. and Tim Hortons Inc.

“BCE is an attractive-yielding stock, which makes it extremely hard to sell,” Seif said. “But when you look at its business model, its business is deteriorating in our mind.”

The Purpose Dividend fund, which has about C$80 million in assets, has gained 22 percent since its inception in September, ahead of a 20 percent increase in the Standard & Poor’s/TSX Composite Index in the same period.

The average management fee across Purpose’s eight funds is 0.54 percent, comparable to other ETF providers and lower than active managers, Seif said.

ETF Rivals

Competition on fees within the ETF industry has been fierce with No. 2 provider BMO Asset Management Inc. and Vanguard Investments Canada Inc. taking share from market leader iShares. In March, iShares cut fees on some of its most popular ETFs. The firm holds about 64 percent market share as of May 31, down from about 83 percent after acquiring Claymore, according to data from the Canadian ETF Association.

Instead of undercutting each other, ETF participants need to target active managers, Seif said.

“The idea of iShares competing with Vanguard and BMO, cutting fees, is a silly notion,” Seif said. “It’s cheap already. It’s still not capturing the attention of the marketplace as much as it needs to. That’s what the market doesn’t get.”