Fiera, Back on M&A Trail, Eyes Emerging Market and Credit Funds

Updated on
  • ‘We’re ready to be aggressive in alternative assets,’ CEO says
  • U.K. office under consideration after deal with Bedrock Asset

Jean-Guy Desjardins, chief executive officer of Canadian asset manager Fiera Capital Corp., hasn’t even closed his last two deals and he’s already busy plotting the next one.

Desjardins, whose firm expects to close its $145 million purchase of Dayton, Ohio-based Apex Capital Management Inc. this week, is on the lookout for emerging-markets fund companies and managers of so-called “alternative” assets such as infrastructure, real estate and credit, he said. Talks have begun with targets in Canada, the U.S. and outside North America, he said.

“It’s a very active time for us,” Desjardins, 71, said in an interview Friday after the company’s annual meeting in Montreal. “We have six, seven, eight prospects that we are looking at.”

Mergers and acquisitions are a key component of Fiera’s drive to double assets under management to C$200 billion ($153 billion) by 2020 from C$98 billion at the end of March. Montreal-based Fiera has completed at least 12 deals since its creation in 2003, helping to push its stock to the best performance against its Canadian peers in the past five years, according to data compiled by Bloomberg.

“They have a very solid track record of generating assets through acquisitions, and people definitely expect deals to continue," Jaeme Gloyn, an analyst at National Bank Financial in Toronto, said in a telephone interview. "It would be seen as a negative by the market if M&A activity went dry.”

Dating Process

National Bank Financial’s parent, Montreal-based National Bank of Canada, owns about 31 percent of Fiera, data compiled by Bloomberg show.

Fiera’s shares have risen 60 percent in the five years through Monday, the most among non-bank Canadian asset managers such as AGF Management Ltd., which lost 74 percent over the same period, and CI Financial Corp., which gained 19 percent. The S&P/TSX Composite financial sector index has risen 28 percent over that time. Fiera fell 0.5 percent to C$13.15 at 10:11 a.m. Tuesday, giving the company a market value of C$941 million.

Discussions are most advanced in the three-year-old search to add an emerging-markets stocks and fixed-income firm, Desjardins said. He declined to name the target.

“We’ve been working on this file for 15 to 18 months,” he said. “I liken this to a dating process. We’ve not yet gone down on one knee and asked for their hand, but we’re starting to want to get married. We should know where we stand this year.”

Credit Focus

Alternative assets such as credit fund managers are another key area of focus for Fiera, Desjardins said. Having built a C$475 million debt fund in Canada, the company is keen to add a similar capability in the U.S., he said.

“We’re ready to be aggressive in alternative assets, and especially credit,” he said. “We don’t do any alternative asset management in the U.S., and we have a huge priority to grow in this field."

Fiera announced an agreement in March to buy five assets for its infrastructure arm, including the tunnel to Billy Bishop Toronto City Airport.

Besides acquisitions, Fiera’s C$200 billion goal is predicated on “organic” asset growth of about 5 percent a year through net client inflows, and average annual returns of 4 percent to 5 percent from the various markets that the company invests in, Chief Operating Officer Sylvain Brosseau told shareholders Friday.

U.K. Office

“Markets are obviously risk No. 1” for Fiera, Gloyn at National Bank Financial said. “They also have to watch retail assets. The industry in Canada as a whole is struggling in attracting retail mutual funds.”

Like other asset managers, Fiera is up against investors’ growing appetite for low-cost exchange-traded funds. Its retail assets under management, mostly mutual funds, fell about 8 percent to C$26.4 billion at the end of March from a year earlier. The company acts as a sub-adviser on a few ETFs but doesn’t offer any Fiera-branded ETFs.

About five senior Fiera executives in Montreal are involved in merger and acquisitions efforts, along with colleagues in the company’s New York office, Desjardins said. Fiera has about 460 employees, including about 150 investment professionals.

Those numbers may swell if Fiera presses ahead with plans to open its first U.K. office following an agreement last month to run a global equity fund for clients of London-based Bedrock Asset Management Ltd.

“One day soon, we’ll need to be in London,” Desjardins said. “I think we’ll have a presence in London by the end of the year, even if it’s only to do marketing, distribution and servicing. We will need this to look after our clients.”