Fiera Targets U.S. for $150 Billion Asset Goal: Corporate CanadaFrederic Tomesco
Fiera Capital Corp., the Canadian money manager trading close to a five-year high, plans to more than double its assets to C$150 billion ($145 billion) by adding smaller U.S. firms.
Fiera, which managed C$64.5 billion as of March 31 after buying Natcan Investment Management from National Bank of Canada last year, expects to increase that amount over the next three years through acquisitions and internal growth. A year ago, Fiera was targeting assets of C$100 billion.
“Our objective is to hopefully make an acquisition or two or three in the U.S. market, preferably in the high net worth segment because we already have institutional distribution,” Chairman and Chief Executive Officer Jean-Guy Desjardins said. “The sweet spot for us is between $2 billion and $10 billion of assets under management.”
Takeovers are part of the reason Montreal-based Fiera has outperformed other Canadian asset-management stocks in recent years, said Greg Dean, an analyst and portfolio manager at CI Investments Inc.’s Cambridge Advisors unit in Toronto. Fiera has returned 29 percent in the past three years, the best performance among Canada’s five largest publicly traded asset managers, according to data compiled by Bloomberg.
“The types of deals Jean-Guy has done have been one-off, negotiated transactions, and he’s had a reason why those make sense for his business every time,” said Dean, part of an investment team that oversees about C$6 billion in equities, including Fiera stock. “If they remain disciplined in their approach, unearth some of the less competitive transactions instead of buying the first thing that’s up for sale, then they will be equally successful.”
With a market value of C$573 million, Fiera is the fifth-largest publicly traded asset manager in Canada. IGM Financial Inc. is the largest, with a value of C$12 billion. Fiera fell 0.1 percent to C$10.09 at the close of trade in Toronto today. The stock reached C$10.35 in intraday trading on May 24, its highest since January 2008.
Fiera’s C$150 billion assets target by 2016 is predicated on stock prices rising by an average 5 percent annually, Desjardins said. The company can tap National Bank’s distribution network, as well as its own sales force, to sell mutual funds to investors.
“To get to C$150 billion you need C$85 billion, and of that, $65 (billion) is organic,” Desjardins said May 23 after the company’s annual meeting in Montreal. “So we need to do about C$20 billion in strategic acquisitions.”
Fiera is targeting U.S. fund managers that either focus on emerging markets equities, emerging markets bonds, global fixed income or U.S. fixed income, Desjardins said.
“If we can make an acquisition that gives us the high net worth base in terms of clients, marketing and servicing talent that takes care of that base, and investment management capabilities in any of these segments, that to us would be an ideal candidate to acquire,” he said.
Starting small in the U.S. increases the odds that the expansion will pay off, said Dean at Cambridge Advisors.
“I’d like to see them do a tuck-in deal in the U.S. to get that expertise and build a track record,” he said. “Then maybe in 12 to 18 months you can find a sizable piece that is very accretive because you’ve already got the people and the structure to run those assets.”
Fiera has a “war chest” of about C$150 million available for transactions, Desjardins said, adding that the company could also sell stock to pay for a deal.
“If we’re successful in what we are trying to do there’s a reasonable probability that at some point we will need to do an equity financing to support our acquisition strategy,” he said.
Fiera’s biggest difficulty may come in persuading its largest shareholder to approve deals that would involve stock, said Dean. Montreal-based National Bank, Canada’s sixth-biggest lender, controlled about 35 percent of Fiera’s outstanding shares as of last month, according to the company’s management information circular.
“National Bank is going to have a huge say in every potential acquisition that involves stock because they are such a big shareholder,” said Dean. “Fiera’s management team is very entrepreneurial, and if they have to run that decision by a very large entity they might not be able to act as quickly as they would want to. Canadian banks are pretty risk-averse.”
National Bank is “fully supportive” of Fiera’s growth strategy, Claude Breton, spokesman for National Bank, said in an e-mail. “Right from the start, we stated clearly we viewed Fiera and its management team as a growth platform in Canada and beyond.”