TORONTO — One out of three Canadians is financially linked to a credit union but the numbers are not as strong when it comes to having their investment needs met. The January completion of a merger between Provincial Credit Union Centrals and Desjardins Group aims to change those numbers, however.

The two entities are heading a partnership between Northwest Funds and The Ethical Funds Company that will create a $5.5 billion investment firm. Initially announced on Sept.19, 2007, the partnership has produced the new company Northwest & Ethical Investments L.P. Both the Northwest Funds and Ethical Funds brands will continue to operate under that name. Northwest & Ethical became responsible for managing the assets of both firms as of Dec. 28, 2007. Provincial Credit Union Centrals and Desjardins Group will each own 50% of Northwest & Ethical.

“When we looked at the book of business at credit unions in Canada, we noticed a large sum [is] held in competitors’ products,” said Don Rolfe, CEO of the new company. “But if we were able to demonstrate that our product was comparable, why wouldn’t you want the one that provides greater compensation and increased market value. In essence, the credit unions own the fund and they have an inherent investment in the firm.”

Based in Toronto, with offices in Vancouver and Montreal, the transition of all operations to one platform is anticipated to be completed by the fall of 2008.

Founded in 1992, Ethical Funds manages 26 funds with $2.67 billion in assets as of Aug. 31, 2007 with a strong focus in socially responsible investments. Created in 1997 and acquired by Desjardins in 2003, Northwest Funds is one of the fastest growing mutual fund companies in the industry with $2.78 billion in assets under management as of Aug. 31, 2007.

Canada’s Provincial Credit Union Centrals of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia and Prince Edward Island collectively own 100% of Ethical Funds. They also own 50% of Credential Financial Inc., which distributes Ethical Funds through member credit unions. The Provincial Credit Union Centrals also represent ownership of more than 400 credit unions across the country with assets totaling $99 billion as of June 30, 2007.

Desjardins Group is considered the largest integrated cooperative financial group in Canada, with overall assets of more than $143 billion as of June 30, 2007. It comprises a network of caisses, credit unions, and business centers in Qu?(C)bec and Ontario, and some 20 subsidiary companies in life and general insurance, securities brokerage, venture capital and asset management, many of which are active across the country.

Rolfe said partnership discussions began in April 2007 when Ethical Funds was considering growth options. After a strategic review, it was discovered that while one in two Canadians knew about the fund firm, Qu?(C)bec and Ontario remained untapped territories, he added.

“No one has ever shrunk themselves into greatness,” Rolfe said. “We asked, ‘how do we continue to grow in the marketplace?’”

Because Ethical Funds and the Provincial Credit Union Centrals have strong growth records and low employment rates, Rolfe said attrition is not a concern as a result of the merger.

“We made a commitment to our staff that there will be no job losses,” Rolfe said, adding there will be some reshuffling of activities to other divisions.

The board of the new company is scheduled to meet this month to, among other agenda items, decide on a permanent name. Rolfe compares the names Northwest Funds and Ethical Funds to the very familiar Proctor & Gamble moniker: both are independently strong with a diversified product line. A branding campaign is expected by April.

“Both names are very good,” Rolfe said. “We are taking the approach that both brands are very important.”