Fiera Capital Targets Assets of C$100 Billion: Corporate Canada
2012-04-16 04:01:01.0 GMT


By Frederic Tomesco
    April 16 (Bloomberg) -- Fiera Capital Corp., the Montreal-
based money manager that acquired Natcan Investment Management
from National Bank of Canada, plans to double assets by 2016 as
the firm adds clients and stocks advance.
    Fiera’s C$309.5 million ($310 million) acquisition this
month boosted assets by 88 percent to about C$55 billion, making
Fiera Canada’s third-largest publicly traded asset manager.
    “Purely on an organic basis, we think we can double our
assets under management within five years,” Fiera Chief
Executive Officer Jean-Guy Desjardins, 67, said in a telephone
interview. “I think we will be able to generate 15 percent
annual growth, which factors in gains in market share and
increases in unit values. We’re bullish on stocks.”
    Montreal-based National Bank, the country’s sixth-largest
lender, acquired a 35 percent stake in Fiera as part of the
Natcan transaction, with an option to increase it to 40 percent.
The bank also agreed to maintain an undisclosed level of assets
under Fiera’s management for seven years.
    The transaction gives Fiera access to National Bank’s
distribution network, which includes 442 branches across Canada
and about 2,000 financial advisers. National Bank Financial, the
bank’s brokerage unit, has an additional 120 branches employing
about 1,000 investment advisers.

                       ‘Critical Mass’

    “This is very positive for Fiera to gain a bank partner,”
Stephen Boland, an analyst with GMP Securities LP in Toronto,
wrote in a note to investors published April 10. The Natcan
purchase will let Fiera “increase critical mass and realize
economies of scale which are crucial in the asset management
industry,” he said. Boland has a buy rating on Fiera Capital.
    Fiera closed at C$8.45 on April 13, for a market value of
C$478 million. The stock has gained 17 percent since the day
before the Natcan deal was announced Feb. 27, making it the best
performing Canadian asset manager this year.
    When ranked by assets, Fiera trails CI Financial Corp. and
No. 1 IGM Financial Inc. among Canadian-based publicly traded
fund management companies.
    “I don’t think it’s that much of a stretch” for Fiera to
double assets in five years, said Brandon Snow, a fund
manager with Cambridge Advisors in Toronto, which oversees about
C$3.5 billion and holds Fiera shares. “Fiera has shown that they
can continue to grow. With the banks pushing out the
independents, Fiera is probably one of the names that will win
out in the end.”

                        National Funds

    About 11 percent of the bank’s brokerage customers now own
National Bank funds, a proportion that Desjardins said will
increase over time.
    “What’s good for the bank will be good for us,” he said.
    Fiera has retained about half of Natcan’s 90 employees,
including teams of fund managers that oversee corporate bonds
and small-capitalization Canadian stocks, Desjardins said.
Duplicate investment vehicles will be merged, Desjardins said,
citing government bond funds and Canadian growth funds as
examples.
    Total cost savings from the deal will probably be about
C$10 million, Fiera said in a March 2 filing.
    “The pie isn’t growing that quickly in the mutual fund
industry in Canada, so if you want to grow, you have to get
bigger by aligning with other people,” Snow said. “You need
scale to succeed, and this transaction brings the required level
of scale to Fiera.”

                         Hedge Funds

    Fixed income accounts for about two-thirds of Fiera’s
assets, Desjardins said. Equities represent 25 percent, while
“alternative” investments such as real estate and
infrastructure make up the remainder.
    Fiera, which oversees six hedge funds with about C$700
million in assets, plans to start up a seventh such fund in the
weeks ahead, Desjardins said. He declined to be more specific.
    “There are plenty of growth opportunities in alternative
investments,” he said. “When bond yields are so low, people
look for investment vehicles that can provide better returns.”
    Desjardins, who is also Fiera’s chief investment officer,
said he’s optimistic stocks will outperform bonds in the next
five years as economic growth takes hold in the U.S. and
elsewhere. Stocks may return an average of 5 percent to 6
percent a year during the period, he said.
    “Dislocations” such as the Greek debt crisis or concern
over burgeoning U.S. government debt “are starting to
disappear,” he said. “Tools have been put in place by policy
makers to manage and rectify imbalances. We are closer to the
day where we can embark on a four-, five- or six-year growth
phase.”

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--Editor: Jacqueline Thorpe, David Scanlan