Guardian’s merger with Desjardins brings scale, access to ‘permanent capital’

Guardian was founded in 1962. George Mavroudis, president and CEO, said the firm was in a solid position financially. But the Desjardins deal brought added scale immediately. 

“It’s not so much that bigger is always better,” Mavroudis said. It’s that like its competitors, Guardian “has enormous demands around technology reinvestment, [and] all the infrastructure they need to build.”  

Guardian, which previously sold its Worldsource business to Desjardins in 2022 for $750 million, brought about $168 billion in client assets to the merger. 

Mavroudis has landed the job of president and CEO of Desjardins GAM, overseeing $280 billion in combined client assets. In addition to responsibility for Desjardins GAM, which manages assets on behalf of other Desjardins entities, he’ll manage Guardian’s ETF and mutual funds businesses in Canada and the U.S.  

Pre-merger, Guardian had more than $1 billion on its balance sheet and was prepared to invest for growth, he said. It’s made a number of acquisitions, including BNY Mellon Corp.’s Canadian wealth management business in 2021 and Sterling Capital Management LLC in 2024. Those deals netted $5.5 billion and US$77 million in assets, respectively,

Post-merger, Mavroudis is setting his sights on lofty targets. 

“Our goal is to, over the next five years, be a top asset manager for Canada, but looking forward, to also being a top 100 global asset manager in the world.” 

That would require about $500 billion in assets under management (AUM), he estimated. 

To achieve its top 100 goal, Desjardins GAM will be looking for growth in Canada and elsewhere. Desjardins previously cited Guardian’s established presence in the U.S. and the U.K., as an opportunity to “expand our reach.” 

In a press release this week, Desjardins said the acquisition strengthens its role as a leading asset manager for institutional and private wealth clients across Canada, while expanding its presence internationally. 

“Closing this transaction allows us to scale faster, reach further and enhance the investment solutions we can offer our members, clients and investors. It positions us for sustainable, long-term growth while bringing in a team that fits our culture and ambition,” said Denis Dubois, president and CEO of Desjardins Group. 

Retail market

It’s only been six years since Guardian returned to the retail market after selling its mutual fund business to Bank of Montreal in 2001. During that period, it maintained a retail presence as a manager of separately managed account solutions for Canadian dealers and as sub-advisor for retail funds offered by other partners. But Guardian Capital LP’s launch of its first ETFs in 2020 signalled a wider push back into the segment. 

As part of Desjardins GAM, Mavroudis anticipates a bigger push to reach Canadian advisors. With retail channels (advisory and DIY) expected to grow faster than the institutional space over the next decade, the fund and ETF space is an important “core strategic driver” of growth, he said.

A direct benefit of the integration with Desjardins GAM, he said, is “better strategic partnership with retail advisory dealers,” at a time when many dealers are reducing the number of partners they work with. Being able to meet minimum AUM and operational thresholds of some of the larger dealer affiliates, and to compete on fees and costs is also key. 

Mavroudis doesn’t expect any impact on Guardian products or consolidation with Desjardins products. Desjardins ETFs and mutual funds will continue to be run by a different investment team at Desjardins Investments, under a different mandate. 

“There’s very little in terms of overlap between these organizations, which is what made this transaction really interesting — because it’s not about cost, it’s about growth synergies,” he said. “We think that we can upscale the size of the business together as partners far faster than if we did it individually.” 

Private assets

Guardian has several liquid alternative products and anticipates developing more. 

Mavroudis said that in the past five years, there’s been a push to bring private asset access to the retail market. While other firms responded, Guardian has been cautious because of the fundamental mismatch between liquid vehicles and illiquid underlying assets. 

“Most of them couldn’t resist in launching what they were being asked to provide, because the amount of assets to raise were quite significant,” he said. However, “Just because sometimes clients ask for something doesn’t mean you should be giving them what they’re asking for.” 

Guardian does have private real estate and private infrastructure funds, but they have largely been aimed at institutional investors. According to its third-quarter financials, institutions make up the largest chunk of its AUM and advisement — $103 billion compared to $52 billion for retail and intermediary, and $11 billion for private wealth.

Mavroudis noted that Desjardins has expertise in private markets that Guardian can learn from. It also has general account capital to invest, as an owner of both life and health and property and casualty insurance business units. “Permanent capital is incredibly important when you’re seeking to develop things that are more illiquid, like private assets,” and more complex, Mavroudis said. 

“Desjardins itself has a couple of interesting private passive capabilities that were born from the permanent capital of the insurance companies, specifically private infrastructure, private real estate and most recently, private equity,” he said. “They have actually figured out how to deliver a retail solution to their wealth distribution channel. So that’ll be something interesting for us to take a look at and see if we can bring some of our private capability into the marketplace as well.” 

However, he said Guardian’s focus is likely to be more on liquid alternatives rather than private assets, because liquidity is “often a requirement” for retail investors.  

“There’s definitely very strong merit to private assets, but the number of investors who can manage to have a meaningful proportion of their holdings in illiquid assets is probably much smaller than the market would sometimes suggest.” 

Mavroudis said the current challenges around gating in private credit will reflect poorly on the whole space until they’re worked out, but that there are responsible ways to bring private market access to a wider range of clients. 

That means educating people and helping them understand that if they want daily liquidity, they shouldn’t be buying an illiquid strategy because it’s a mismatch with the underlying asset. 

It could also mean offering a hybrid strategy combining liquid and illiquid assets. Having “anchor tenants in your strategies, like permanent capital, either balance sheet or insurance capital” could also allow for more flexibility in terms of liquidity, “because you have the backstop of anchor investors,” he said. 

Also, he noted that REITs offer the same exposure as private real estate, just with more short-term market “noise.” 

“In the long run, if I buy a private asset, like a building, whether it’s in a REIT or whether it’s wrapped in a private fund, but I’m prepared to hold it for the next 10, 15, 20 years, I can assure you the returns are going to be very similar, irrespective of the wrapper that you have,” he said.

He added that asset managers launching retail-oriented private credit products should not have been caught off guard by rising redemption requests and the resulting liquidity pressures.

“If that’s the case, they shouldn’t even be launching products. They don’t understand the asset class.”