In September, Montreal-based investment-management firm Fiera Capital Inc. celebrated its fifth anniversary. Celebrating the milestone, however, has more to do with looking ahead than looking back.

Fiera now has more than $20 billion in assets under management, which places it among Canada’s top independent investment-management firms. On the shoulders of its successful private wealth-management and institutional divisions, it is poised to build a retail presence at a national level.

Five years ago, under the leadership of Jean-Guy Desjardins, now Fiera’s chairman, CEO and chief investment officer, Fiera inherited almost $5 billion in AUM from Elantis, a Desjardins Group division. The Quebec giant had decided to reorganize its investment-management business to create Desjardins Asset Management.

When Desjardins Group spun off Elantis in 2003, it kept a 30% stake in what would become Fiera. Desjardins Group now holds a 20% stake in Fiera; employees, 35%; and the balance is held by Jean-Guy Desjardins. In the sense that Desjardins “is very actively employed” in the firm, says Sylvain Brosseau, Fiera’s president and chief operating officer, the firm is 80% employee-owned. It has more than 30 investment professionals in offices in Toronto and Montreal.

Diversification has been the key to Fiera’s success, says Brosseau: “If you want to be in this business for a long time, you had better diversify. From the very beginning, it was clear we wanted to diversify — from a regional point of view, from a client point of view, from a revenue stream point of view.”

Fiera grew both organically and by acquisition. When Jean-Guy Desjardins launched Fiera, it only had one client — Desjardins Financial Corp. Fiera still manages several products for Desjardins Financial.

In 2005, Fiera added Senecal Investment Counsel in Toronto to its roster, adding strength in institutional investment. The merger with Senecal was eclipsed later that year by the acquisition of Toronto-based YMG Capital Management Inc. The deal boosted Fiera’s AUM and added strength in private wealth-management. YMG brought a broader client base to the table and Fiera offered YMG money managers a fresh start after an ugly proxy battle that had put the focus on YMG management rather than on portfolio management.

YMG also had completely different distribution than Fiera. Because it had worked closely with Desjardins Financial to develop its products, it had not worked directly with distributors. And Senecal’s network had been small by comparison. “Prior to the merger with YMG, the only representation we had at that point in the retail market was through subadvisory services,” says Brosseau. “We managed mutual funds, closed-end funds, wrap programs and things like that.”

Since 2003, Fiera has built on Senecal’s and YMG’s foundation in institutional and private wealth management, targeting high net-worth clients with investible assets of about $10 million.

Brosseau counts Fiera among Canada’s leading traditional investment-management firms but also cites the need to be innovative. Fiera offers alternative and quantitative strategies, in addition to active and structured fixed-income, and Canadian and global equities strategies for its private wealth and institutional investors.

Alternative strategies are key to setting Fiera apart from its competitors, Brosseau says: “Not everyone has alternative strategies, especially among the traditional firms.”

Nor are there many firms of Fiera’s size that come with its kind of systems, he adds, which allow Fiera to manage sophisticated investment strategies from a regulatory point of view.

Fiera launched its first alternative product — a market-neutral strategy — in 2005.

“During the period when everyone was doing well, we were doing well, too,” Brosseau says. “But nobody is looking to switch managers when the markets are doing well.”

When the markets shuddered, Fiera’s growing palette of alternative strategies were eagerly adopted by its private clients, and became a key means of it differentiating itself from traditional firms.

“We gained business in private wealth because we had alternative strategies,” explains Brosseau. “When market volatility started to become an issue, we had something that the others did not.”

New clients started moving portions of their portfolios to Fiera to take advantage of its strategies. There are now eight alternative strategies available to very HNW clients.

This year, Fiera launched its equity market-neutral fund for accredited investors. Managed by Patrick Roy and Jean-Philippe Choquette, the fund has an important role to play in Fiera’s future in the retail market, says Brosseau: “If it’s good for the HNW individual, it should be good for retail investors.” While it is a sophisticated product for the average investor, the fund’s goal — to reduce market risk by relying on pairs trading — is relatively conservative.

@page_break@But Brosseau shies away from calling the market-neutral fund a hedge fund. “We don’t talk about hedge funds,” he says. “We talk about alternative strategies, because a lot of people have heard — and a few have experienced — some tough stories about hedge funds.”

But alternative strategies, whether they are called hedge funds or not, can offer non-correlation with and lower volatility than the overall market. “Why not bring this to a retail market?” asks Brosseau.

Fiera’s goal is to facilitate the acceptance of alternative strategies in retail portfolios. Education will be a hurdle, but by no means an insurmountable one. Fiera is betting that, given the opportunity, retail investors will see the value of more complex products, especially in volatile markets.

“From an operational point of view, producing alternative strategies for a retail market is a little bit more complicated,” Brosseau says, as they are available only to accredited investors. “Obviously, we cannot eliminate the constraints. We can only alleviate them [by streamlining paperwork and providing transparent administration].”

The transition to the retail marketplace is a big step for Fiera. Retail products require a distribution system, so Fiera has added an experienced sales team of 13 with nine wholesalers, who have five to 25-plus years of experience among them. New Fiera offices are being set up in Winnipeg, Calgary and Vancouver.

While Fiera is planning to launch more alternative strategy funds for the retail market, it offers only the market-neutral equity fund at this point. So, to maximize the return on its investment in the wholesale team, Fiera wholesalers are also distributing HSBC Bank Canada principal-protected notes, as well as Equity Income Convertibles, reverse-convertible notes sponsored by Barclay’s Bank PLC, which will appeal to accredited investors hungry for yield.

Fiera’s day-to-day operations are decentralized, as would be expected of a firm that until recently has functioned in two cities, two provinces and two languages. Teams of two or three have specific research coverage and portfolio responsibilities, but findings are shared and debated regularly in larger forums. John-Guy Desjardins has taken over from YMG’s Eric Ennis, who has retired, as CIO, and added two co-CIOs, effectively creating an office that manages a broader investment policy.

The business now operates in both of Canada’s official languages; the firm offers French lessons to its Toronto staff and English lessons to its francophone staff.

In the immediate aftermath of the merger with YMG, Brosseau says, staff dreaded answering phone calls from each other because it was a challenge to do business in a foreign language. Now the system runs like clockwork. During business calls, the English-speaking staff, more often than not, are eager to practise their French — to the chagrin of Montreal staffers equally keen to use their English.

Fiera is definitely ready to move westward. IE