Experienced execs launch new firm

Although it has been only four months since Racioppo and Trottier left Jarislowsly Fraser, the partners have amassed $525 million in assets under administration (AUA) for Coerente, which also has offices in Montreal.

With several clients already on Coerente’s roster, many of whom formerly were with Jarislowsky Fraser, Racioppo and Trottier plan to continue building the firm organically.

There are no plans for acquisitions, Racioppo says, although the partners have been approached by some players in the investment-counselling sector.

“When word got out that we were starting up our own firm,” Racioppo says, “there were a lot of smaller firms out there with offers to partner up or asking to join us. But it’s just not a growth strategy we are looking at right now.”

The investment-counselling sector is a highly competitive one, with smaller family offices targeting markets that also are being served by larger firms such as Jarislowsky Fraser.

The partners plan to make Coerente a competitive player in a crowded field by maintaining an investment strategy that is similar to the one followed at their former firm. This strategy, says Racioppo, concentrates on companies with strong balance sheets and cash flows.

“It’s a very fundamental, low-risk, low-fee approach that we take,” Racioppo adds, “and one that I feel, again, is underserved in the Canadian marketplace.”

In fact, consistent returns with low volatility for clients is a fundamental priority for – and the meaning behind – the new firm’s name.

Says Racioppo: “‘Coerente’ – in Italian, Portuguese and Spanish – means ‘consistent’ or ‘coherent’, which is exactly what we are trying to [achieve] for clients.”

To do that, Coerente will offer clients segregated management in stocks, bonds and money market securities.

Clients will be able to tailor their portfolios and include individual securities, as opposed to holding units in either mutual funds or pooled funds.

“People are becoming more conscientious about what they are investing in,” says Racioppo. “Some people don’t like tobacco or alcohol; others don’t like what is going on in the energy fields. So, this strategy really allows [clients] to have more control over their portfolio.”

This investment strategy, he adds, also is reassuring for clients who may have been hit hard in the past few years.

“We have gone through some pretty volatile markets and a period in which, not five years ago, people lost an awful lot of money in the market,” Racioppo says. “They haven’t forgotten about that, and there is still a fear [regarding] the stock markets. But we can give people some comfort in suggesting that they can still achieve a decent single-digit return with very little risk.”

Clients with specific tax concerns also may prefer segregated management, Racioppo says, as it provides more tax efficiency than a pool with shared potential gains, losses and transactions.

Although Coerente has a minimum threshold of $1 million in client assets, Racioppo says, the average client probably has about the $5 million in AUA with the firm.

That reflects developments in the portfolio-management world. As more players enter the marketplace, the competition for high-end business gets tougher. Some firms have increased their minimums beyond the average of $1 million to several million dollars, says Katie Walmsley, president of the Toronto-based Portfolio Management Association of Canada.

“Among our members,” says Walmsley, “client minimums have been on the rise over the past six or seven years in the private-client segment. It isn’t always a concrete set minimum, but some firms that used to have a $500,000 client minimum have raised it to $1 million, and those who had been at $1 million have raised it to $2 million or more.”

Racioppo and Trottier know this market – and their competition – very well, as they each spent more than 25 years at Jarislowsky Fraser.

Most recently, Racioppo was that firm’s president and director, while Trottier was vice president. The two announced their resignations from Jarislowsky Fraser in early November, when founder Stephen Jarislowsky announced he was stepping down as head of that firm. (Jarislowsky remains as the firm’s chairman.)

“It was a question of us wanting to do things differently,” Racioppo says. “We had different ideas, in terms of direction and decisions. And, as a result, we thought it was time to go out on our own to focus on a market that interests us the most.”

Along with Racioppo and Trottier, six other former Jarislowsky Fraser employees decided to jump ship and join the Coerente team.

Among them are Yolande Gooderham and Jean-François Beaulieu, both assistant portfolio managers, and Charlie Ongking, former head of U.S. equities at Jarislowsky, the last of whom will now be involved in researching foreign equities and portfolio management at Coerente.

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