Fiera creating joint venture to expand alts portfolio

Pensions & Investments | 14 November 2016

 

Fiera creating joint venture to expand alts portfolio

 

 

BY RICK BAERT

 

Fiera Capital Corp. is taking the next step in its aggressive expansion plans that include adding agriculture and private equity to its current asset class offerings.

 

The Montreal-based money manager, with C$110 billion ($82 billion) in assets under management, has set a goal of reaching C$220 billion by 2020. To that end, Fiera is creating a joint venture with three partners to invest in agriculture and, at a later date, to add private equity, said Sylvain Brosseau, Fiera's global president and chief operating officer.

 

The joint venture will be led by Antoine Bisson McLernon, former managing director and head of natural resources and private equity at PSP Investments, Montreal. Mr. McLernon will be partner and CEO of what will be Fiera Comox Partners; he and two other partners, who have not yet been named, will hold 35% of Comox, with Fiera holding the remainder.

 

PSP manages the C$116.8 billion in pension assets for Canadian federal public service workers as well as Canadian forces, reserve forces and the Royal Canadian Mounted Police. Mr. McLernon was replaced by Managing Director Simon Marc, who had led PSP Investments Europe, said a PSP spokesman.

 

“We're optimistic that we can deliver the (agriculture) strategy, first to Canada and then to the United States,” Mr. Brosseau said. “It ultimately will be a global effort.”

 

Fiera executives expect the joint venture to create an open-end fund that will target a first close of C$150 million to C$200 million, Mr. Brosseau said.

 

“We've begun with soft marketing to our clients, and the response has been quite spectacular,” he said, although the new farmland strategy does not yet have any assets for investment. “It's a less crowded market, much like infrastructure when we began that about 10 years ago.”

 

The company will leverage its existing relationships with Canadian and, later, U.S. institutional and private wealth clients, a formula for expansion that has worked well with other moves Fiera has made in the past several years, he said.

 

Adding emerging markets

 

Mr. Brosseau said Fiera's efforts to expand its alternatives portfolio is an “organic” effort. Its latest additions to other asset classes, however, are through expansion, as with its pending deal to acquire London-based emerging markets equity manager Charlemagne Capital, which was announced Sept. 30.

 

“Most of what we've done in alternatives has been done organically,” Mr. Brosseau said. “It doesn't require a lot of capital, but it does mean we have to find our champions ... it requires a lot of work to bring in the right people. ... It takes three to five years to become profitable, on average. We have the patience to do that.”

 

With Charlemagne, the deal was made to add emerging markets as an asset class offered by Fiera, Mr. Brosseau said, with the subsequent expansion into Europe and getting Charlemagne's distribution network in Europe a bonus.

 

“We were looking for the best emerging markets manager we could find,” Mr. Brosseau said. “It was not a strategy to go into Europe. The best emerging markets manager happened to be in London.”

 

Fiera has been active in terms of acquisitions over the past year. Along with the pending Charlemagne deal, Fiera this year has acquired U.S.-based money managers Larch Lane Advisors LLC, a hedge fund of funds and liquid alternatives manager, and global equity manager Apex Capital Management LLC. That comes on top of the 2015 acquisition of fixed-income manager Samson Capital Advisors LLC.

 

An "asset gatherer'

 

Robert Boston, Toronto-based partner and practice leader for the investment consulting group, Ontario and Western Canada, at investment consultant Morneau Shepell Ltd., said a lot of Fiera's expansion strategy “has to do with the guy at the top” — Jean-Guy Desjardins, its chairman and CEO.

 

“He's an asset gatherer,” Mr. Boston said. “Quite frankly, there aren't a lot of them in Canada. A few others, like Connor, Clark & Lunn and Phillips, Hager & North, have gotten into the multiasset space ... but Fiera has been building more recently.”

 

Mark Chow, associate partner and head of Canadian manager research at Aon Hewitt Canada, Toronto, added money managers are aware that Fiera is in the market for acquisitions. “That C$220 billion (goal) is a target, for sure, but they're really advertising to the market that they're looking for smart acquisitions.”

 

While other Canadian managers might not be done with acquisitions themselves, Mr. Chow added, they might be hampered by the weaker Canadian dollar vs. the U.S. currency. “But Fiera has the budget to do this. They're still being selective.”

 

Fiera is not focusing solely on expansion via acquisition, Mr. Boston said. “They're also building internally, building their capabilities,” he said. “They're buying managers, but they also can bring in people to build from within.”