Money-management firms Matrix Asset Management Inc. of Halifax and Toronto-based Marquest Asset Management Inc. are planning to join forces through a merger that is expected to produce a stronger team and help the combined entity take advantage of economies of scale.
“Marquest has similar business lines as Matrix, as well as complementary expertise,” says David Levi, president and CEO of Matrix. “There are tremendous synergies between the two firms. Marquest has good skill sets in managing funds, and we will be adding those to our team. [Marquest] also has a significant amount of equity and working capital, which will assist us in replenishing our capital.”
Matrix, with about $1.1 billion in assets under management (AUM), has been focusing on a strategy that includes organic growth as well as growth by acquisition, Levi says. The merger, which is expected to close later this month, will take the form of a share exchange – and Levi says he is not at liberty until the deal closes to disclose the value of Marquest’s assets.
Privately held Marquest has a diversified lineup of six mutual funds and one closed-end fund, as well as a private wealth-management business. The firm also is a leader in the development of flow-through share partnerships.
“Marquest does a significant flow-through share business, as do we,” Levi says. “There is strong expertise on the flow-through side. In addition, their lineup of mutual funds is similar to ours, and there will be opportunities to find areas of overlap and see where money can be saved.”
It’s too soon to say if any mutual funds will be merged, Levi adds, but he notes that there are other areas in which efficiencies could be found, such as human resources and use of office space. For example, both firms have large offices in Toronto, and less space will be required after the amalgamation. As well, back-office functions can be made more efficient, and Marquest can benefit from Matrix’s established national network of sales offices.
Since a reorganization almost three years ago that combined mutual funds, retail venture-capital (VC) funds and institutional and high net-worth money management under the Matrix banner, Levi has been working to fit the pieces of the firm, which are spread nationwide, together.
@page_break@Matrix has three main operating divisions, with the longest-running being its VC retail funds arm. Operating through GrowthWorks Capital Ltd. of Vancouver, this division includes such long-standing funds as GrowthWorks Canadian Fund (formerly Working Ventures), GrowthWorks Atlantic Venture Fund and Working Opportunity Fund, the last of which invests in some notable British Columbia-based startups.
Matrix entered the mutual funds business in 2009 with the acquisition of the fund family then known as Mavrix Fund Management Inc. of Toronto, subsequently renamed Matrix. In 2010, the institutional piece was added with the acquisition of Seamark Asset Management Ltd., a Halifax-based high net-worth and institutional money-management firm whose shares were traded on the Toronto Stock Exchange. Through a series of corporate moves, the purchase of Seamark resulted in a public listing for the entire organization under the Matrix name.
Recent years have been challenging for the GrowthWorks retail VC arm due to the combination of poor returns and the evaporation of investor tax credits in Ontario. Thus, Levi has been focusing on growing the more profitable mutual fund and high net-worth side of Matrix’s business. Matrix offers 17 mutual funds, and the company is looking to expand its activities in financial planning for affluent clients.
“As revenue on the labour-sponsored venture-capital side declines, Matrix is looking to plug the gap with sustainable revenue from other investment-management activities,” says Dan Hallett, vice president and director of asset management with HighView Financial Group of Oakville, Ont. “Every deal it does is with a view to diversifying and strengthening the firm, and building a sustainable revenue stream with growth potential.”
Hallett views Matrix as a “niche manager” looking to compete in specialty areas, such as flow-through shares, in which there is a smaller universe of competitors.
“Trying to get noticed in a crowded market is a struggle,” Hallett says. “A lot of companies are fighting for shelf space, and Matrix must elbow in amongst the CIs and Mackenzies of the world. Even some of the giants are struggling for shelf space these days.”
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