A recent deal between Montreal-based Fiera Capital Corp. and Calgary-based Canoe Financial LP will see Fiera sell its retail mutual fund lineup to Canoe. The deal allows both asset-management companies to build on their strengths, according to senior leadership at the two firms.
“We recognized that for each of our purposes, this might be the perfect strategic transaction,” says Darcy Hulston, president and CEO of Canoe, which has $4.8 billion in assets under management (AUM).
Adds Jean-Philippe Lemay, president and chief operating officer of Fiera’s Canadian division, which manages $143.5 billion in AUM for institutional, private-wealth and third-party retail clients: “We would rather invest in building, let’s say, an innovative way of accessing the direct agriculture market in the private alternative [investment market] than in allocating capital into a specific distribution strategy on the retail side.”
The deal also could be the beginning of a broader relationship between Fiera and Canoe, Hulston says: “We will continue to explore [Fiera’s asset-management] competencies and see if we can launch new funds with them.”
In the deal, announced on Oct. 23, Fiera sold its nine retail mutual funds, representing approximately $785 million in AUM, to Canoe, which will rebrand the funds with its own name.
However, Fiera will continue to serve as subadvisor to four of the funds formerly under the Fiera brand: Fiera Capital Global Equity Fund, Fiera Capital Defensive Global Equity Fund, Fiera Capital International Equity Fund and Fiera Capital Equity Growth Fund. These four funds represent approximately 80% of the AUM in the deal.
“[These funds] definitely were complementary to our lineup,” Hulston says. “We didn’t have those strategies in our lineup and we’d been searching for competency in that space for a while.”
Canoe intends to merge the remaining five Fiera funds – Fiera Capital Diversified Bond Fund, Fiera Capital High Income Fund, Fiera Capital Core Canadian Equity Fund, Fiera Capital U.S. Equity Fund and Fiera Capital Income and Growth Fund – into existing Canoe mutual funds, Hulston says.
For Fiera, the deal to sell its retail mutual fund lineup allows the firm to concentrate on its ambitious plans of aggressive growth both in Canada and globally, Lemay says.
As of Sept. 30, Fiera held $76.4 billion in AUM in its institutional business, $31 billion in its private-wealth business and $36.1 billion in the retail business. In this last line of business, Fiera provides subadvisory services to third-party firms such as National Bank of Canada and Horizons ETFs Management (Canada) Inc. – and, now, Canoe as well.
“Our key focus is to develop talent and to continue to evolve and pour resources into making sure we’re top-quality active managers in all asset classes,” Lemay says.
Dan Hallett, vice president and principal of Oakville, Ont.-based HighView Financial Group, says he’s not surprised that Fiera decided to sell its retail mutual fund lineup in favour of concentrating on its core business lines.
“You can grow more quickly in terms of assets under management [via the institutional market],” Hallett says, “because when you win new business, they’re big chunks of business. It’s not investor by investor; it’s $100 million here, $50 million there, $300 million there.”
During the past 12 months, Fiera has been busy on the acquisitions front. In March, it acquired Toronto-based CGOV Asset Management, which managed $5.3 billion in AUM on behalf of high net-worth and institutional clients. Also in March, Fiera bought Hong Kong-based Clearwater Capital Partners LLC, an Asia-focused investment-management firm with US$1.4 billion in AUM, which added to Fiera’s alternative investment AUM and capabilities.
In December 2017, Fiera acquired City National Rochdale Emerging Markets Fund, with approximately US$1.7 billion in AUM invested primarily in Asian emerging markets.
Fiera indicates it will continue to manage its closed-end and alternative strategies funds, including Fiera Active Trading Fund, Fiera Long/Short Equity Fund, and Fiera Market Neutral Equity Fund and Fiera Capital Income Opportunities Fund.
For Canoe, the acquisition of Fiera’s mutual fund lineup allows Canoe to bulk up quickly, Hallett says: “[Canoe is at] a decent size, but it wants to continue to scale up.”
The Fiera/Canoe retail mutual funds deal is the first major acquisition for Canoe since the firm bought O’Leary Funds Inc. from entrepreneur and television personality Kevin O’Leary in 2015, rebranding some of the O’Leary funds under the Canoe name while merging others into existing Canoe funds.
Hulston says he would be interested in broadening Canoe’s partnership with Fiera: “[Fiera has] liquid alternative competency inside its shop, and that’s something we’ve been exploring.”
Canoe remains in the hunt for more acquisitions, Hulston adds. The company is speaking with “dozens of other firms.” However, Canoe will pursue a deal only if it fits with its investment philosophy and approach.
“We’re not looking for esoteric, exotic strategies,” Hulston says. “We want to stay focused as a core manager with primarily a prospectus-based product that I can sleep at night knowing that my grandparents are [invested] in it. We want to stay ‘core’.”
To increase scale, Hulston says, Canoe may add an ETF to its lineup: “We are going to stay active. We want to add positive alpha and so, to the extent that we can figure out an active ETF as a feature for perhaps a discretionary [portfolio] advisor to use as a tool, that would make sense for us.”
The sale of Fiera’s retail mutual funds to Canoe is expected to close in the first quarter of 2019, pending unitholder and regulatory approvals.