Bank of Nova Scotia, Canada's third-largest bank, has bought Sun Life's investments in CI Financial Income Fund - roughly 37.6 per cent stake in the third-biggest mutual fund in Canada - for Canadian dollar 2.3 billion.

The acquisition of 104.6 million CI shares at C$22 each will make Scotiabank the biggest shareholder in the fund manager and expand its presence in the wealth management area.

The acquisition was made at a significant premium over the $16.64 closing price last week for CI shares.

The stake sale will provide Sun Life with fresh capital injection amidst an increase in bad bets on financial markets for the Canadian insurance sector.

Bank of Nova Scotia expects an immediate increase in its profits from the acquisition despite the worsening turmoil in the financial markets and expects to emerge a wealth management major from the current fringes.

The acquisition of a near 38 per cent stake in CI puts Scotiabank on a clear path to take control of all the assets of the fast-growing investment manager. CI manages about $100-billion in assets.

''This announcement is a significant step forward and demonstrates Scotiabank's ongoing commitment to growing our wealth-management business,'' said chief executive Rick Waugh.

Sun Life opted to sell the mutual fund stake after the insurer reported losses on exposures to failed US financial institutions, including Lehman Brothers and Washington Mutual.

The company lost a third of its market cap amid heavy sell-off in the financial sector in the wake of an unprecedented collapses of banks and insurance companies.