Corporate “rebirth”

The three men had spent a collective 40 years building Seamark into a respected investment-management firm before a combination of management changes and a period of stumbling performance beginning several years ago led to the loss of significant client accounts. After leaving Seamark, the trio had launched LeeSide in 2009 with an emphasis on low-volatility investing and risk management.

David Levi, president and CEO of Matrix, says he is thrilled to have the three executives back in the fold. He calls the move a “renaissance” for Seamark that will add experienced and respected investment-management talent to its institutional and high net-worth pools. The acquisition also will affect the management of Matrix’s family of 17 mutual funds.

Since a reorganization two years ago that had combined mutual funds, retail venture-capital funds and institutional money management under the Matrix banner, Levi has been working to fit nationwide pieces of the puzzle together and achieve synergies among the company’s various financial fingers.

“Matrix is a new name, and we’re working to increase brand awareness,” says Levi, whose Toronto office was bedecked with luggage and dry-cleaned shirts at the time of Investment Executive’s interview – evidence of the frequent travel required of Levi as he oversees operations ranging from Vancouver to Halifax.

“There’s a certain complexity to investing,” Levi says, “and a ‘matrix’ of investment decisions goes into being a successful investor. At the same time, we’re building a matrix of products.”

Matrix has about $1.7 billion in assets under management through its three operating divisions. The longest-running businesses are the vencap retail funds and private-equity pools, operated through GrowthWorks Capital Ltd. of Vancouver.

That firm was founded in 1998 and includes such long-standing funds as GrowthWorks Canadian Fund (formerly Working Ventures), GrowthWorks Atlantic Venture Fund and the British Columbia-based Working Opportunity Fund.

Fund family

Matrix entered the mutual funds business in 2009 with the acquisition of the fund family previously known as Mavrix Fund Management Inc. of Toronto, subsequently rebranded as Matrix.

Mavrix’s investment offerings also had included resources flow-through limited partnerships, an area of expertise for the firm, which had a long history of finding junior resources companies in need of financing.

Mavrix also had developed relationships with operators in the mining sector, says Levi, whose resumé includes a term as chairman of Vancouver City Savings Credit Union and creating the original Ethical Growth Fund.

In 2010, the institutional piece was added to the Matrix puzzle with the acquisition of Seamark, a high net-worth and institutional money-management firm founded in 1982 and publicly traded on the Toronto Stock Exchange.

Through a series of corporate manoeuvres, the purchase of Seamark has resulted in a public listing for the entire organization under the Matrix corporate name.

“David Levi has a long business history,” says Dan Hallett, vice president and director of asset management with Oakville, Ont.-based HighView Financial Group. “He knows the money-management industry, but he has a tall task in front of him in growing Matrix. He has shown a talent for acquiring distressed assets on the cheap, which is somewhat of a venture-capital thing.”

The past couple of years have seen the GrowthWorks retail vencap arm struggle due to poor returns and the drying up of investor tax credits in Ontario, previously a major source of retail vencap fund contributions.

At the same time, Seamark has continued to experience troubles after the Matrix purchase, with AUM shrivelling to $900 million from $2 billion in 2009, when Matrix had acquired Seamark.

“With the people they’ve brought back and their long-standing relationships with clients,” says Hallett, “Seamark has a lot more upside potential and could be a bigger contributor to revenue and profit at Matrix. With the tax advantages disappearing, notably in Ontario, the venture-capital arm is not a growing business, and it’s important to turn Seamark around.”

Recently, Matrix’s most robust line of business has been its mutual funds arm, Levi says, for which AUM has risen to $400 million from $240 million at the time of acquisition. Market share also has risen.

More sales support

The Matrix mutual funds have benefited from the nationwide network of seven sales offices that was in place to sell the vencap funds, Levi says. Matrix’s mutual funds already had been approved to be sold on the shelves of major distributors across Canada; they just needed more sales support and product servicing.

“It’s a tough environment on the mutual fund side,” says Rudy Luukko, investment funds and personal finance editor with Morningstar Canada in Toronto. “Matrix is competing with the big brand names for the loyalty of the advisor channel, and it’s a challenge for small to mid-sized firms to get noticed.”

Matrix offers 17 mutual funds, of which two are managed by Seamark – Matrix Small Companies Fund and Matrix U.S. Equity Fund. The largest fund is the $212-million Matrix Monthly Pay Fund. Recently, demand has risen for Matrix Tax-Deferred Income Fund, which converts interest income to tax-advantaged dividend income.

“The focus will be on products offering income or a combination of income and growth,” Levi says. “At this point, clients are risk-averse. But, in the long run, they will want some growth to protect their investments from inflation.”

Levi adds that growth through acquisition is a possibility. He anticipates there could be opportunities to acquire smaller firms that would be of no interest to the bank-owned firms and financial services industry leaders.

“There is the potential to increase the synergies that come from having a retail venture-capital, mutual fund and money-management arms,” Levi says. “We are of a size at which we can be fleet of foot, and make decisions and create new product faster than the big companies.”

Matrix recently has made a foray into the financial planning arena, acquiring a stake in Toronto-based First Affiliated Securities Inc., a firm specializing in multi-generational planning for affluent clients and business owners.

The goal is to expand First Affiliated nationally, and Levi foresees potential for Seamark to offer services through First Affiliated. IE

© 2012 Investment Executive. All rights reserved.