Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to Fiera Capital's earnings call to discuss financial results of the fourth quarter of 2024. All lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question-and-answer period. As a reminder, this conference call is being recorded. If you would like to ask a question during this time, simply press star one on your telephone keypad.
If you would like to withdraw your question, please press star two. Thank you. I will now turn the conference over to Ms. Marie-France Guay, Senior Vice President, Treasury and Investor Relations. Ms. Guay, you may begin your conference.
Thank you, Emily. Good morning, everyone. [Foreign language]. Welcome to the Fiera Capital conference call to discuss our financial results for the fourth quarter of 2024. Note that today's call will be held in English. Before we begin, I invite you to download a copy of today's presentation, which can be found in the Investor Relations section of our website at ir.fieracapital.com.
Also note that comments made on today's call, including replies to certain questions, may deal with forward-looking statements which are subject to risks and uncertainties that may cause actual results to differ from expectations. I would ask you to take a moment to read the forward-looking statements on page two of the presentation.
On today's call, we will discuss our Q4 2024 results, starting with an update on our AUM flows, followed by highlights of our Public and Private Market platforms, as well as our Private Wealth business. We will then review our financial performance. Our speakers today are Mr. Jean-Guy Desjardins, Chair of the Board and Global CEO, and Mr. Lucas Pontillo, Executive Director and Global CFO. Also available to answer questions following the prepared remarks will be Jean-Michel Biron, President and CIO of Public Markets, and Maxime Ménard, President and CEO of Fiera Canada and Global Private Wealth. With that, I will now turn the call over to Jean-Michel.
Thank you, Marie-France. Good morning, everyone. Thank you for joining us today as we report our results for the fourth quarter and the full year of 2024. Global equity markets had an impressive year in 2024, with investors spending much of the year bracing for a soft economic landing and aggressive rate cuts. Stocks lost some gains towards year-end as pricing pressures and an inflationist policy agenda from the U.S. administration brought into question the extent of rate cuts from the Federal Reserve in the coming year. Fixed income markets also generated positive results in 2024 but retreated somewhat towards the end of the year. The impact of the Federal Reserve's 100 basis points of rate cuts in 2024 was countered by concerns about persistent inflation, with the potential for wider budget deficits and higher tariffs adding to the upside inflation risks.
That saw investors rein in their expectations for rate cuts in 2025. Canadian bonds outperformed their U.S. counterparts, with the spread between the Canadian and U.S. bond yields widening drastically. Against the backdrop of higher markets, our assets under management ended the year at CAD 167.1 billion, representing an increase of CAD 1.6 billion for the quarter and an increase of CAD 5.4 billion, or 3.3%, for the year. Assets in our Private Markets platform grew 1% during the quarter and nearly 7% during the year, to end the year at CAD 19.7 billion, driven by new mandates and positive market action. In our Public Markets, assets under management of CAD 147.4 billion increased 1% during the quarter and 3% for the year, as market appreciation was partly offset by net outflows, which were largely PineStone-related.
Excluding assets under management sub-advised by PineStone, our Public Markets assets increased 2% for the quarter and 5.5% for the full year. I will now turn to highlights of our commercial and investment performance across our asset classes. So, starting with Public Markets platform. Public Markets, excluding assets under management sub-advised by PineStone, saw good cross-mandate activity in the quarter, with more than CAD 900 million of new mandates awarded, primarily from clients investing in our global and large-cap equity mandates. We saw positive net organic growth in the equity platform, excluding PineStone, for both the quarter and the year. Gross mandates were offset by lost mandates and negative net contributions from clients redeeming from fixed income mandates, resulting in approximately CAD 800 million of net outflows for the quarter.
With respect to assets under management sub-advised by PineStone, net outflows were CAD 1.3 billion, CAD 300 million of which were outflows transferred directly to PineStone, and the balance being mostly related to client rebalancing and moving to other managers. As we previously announced, in January of this year, CAD 5.7 billion of PineStone equity mandates from Canoe were withdrawn and transferred directly to PineStone. Client concentration in PineStone has been reduced meaningfully over the last two years. Canoe was the last large single-mandate client. Of the 25 largest clients currently invested in PineStone, under one-third are single-mandate clients with assets under management greater than CAD 1 billion. So, for the rest of 2025, we expect direct transfers to PineStone could be up to an additional CAD 1 billion.
We continue to execute on our decentralized distribution model, and with large PineStone redemptions now behind us, work towards returning to a sustained level of net inflows going forward. Now, turning to investment performance in Public Markets. Despite it being a challenging quarter for outperformance, many key Public Market strategies generated alpha over the one-year period, and nearly all outperformed over the longer three and five-year periods. Our Canadian fixed income strategies continued to perform well, with our Strategic Core and Integrated Core strategies adding value for the quarter, and all three of our flagship Canadian fixed income strategies adding value over the one, three, and five-year periods. Foreign fixed income strategies encountered a more challenging fourth quarter. The Global Multi-Sector Income Strategy lagged its benchmark in the fourth quarter, although it still managed to add more than 200 basis points of value added over the one-year period.
The High Grade Core Intermediate Fund and the Tax-Efficient Core Plus Fund also came in below benchmark in the fourth quarter but continued to outperform over the three and five-year periods. While 2024 was a strong year for global equity markets, it was a challenging year for outperforming, as more than half of the 25% gain of the S&P 500 for the year were driven by the Magnificent Seven.
Under-exposure to this group largely resulted in returns that lagged benchmarks. The U.S. equity market is currently near its most concentrated level in 100 years, with the top 10 stocks in the S&P 500 comprising more than 35% of the index, creating a very challenging environment for generating short-term alpha relative to that index.
After a long record of outperformance, the three strategies sub-advised by PineStone Asset Management underperformed their benchmarks for the quarter and for the year, the U.S. a nd Global strategy underperformed, while the EAFE strategy added value, mainly as a result of their under-exposure to the Magnificent Seven and industrials. Our Canadian equity strategy also underperformed its benchmark for the quarter, mostly as a result of non-exposure to a security which rallied more than 60% in the second half of 2024, but, however, remains in the top quartile for the period versus its peer group. Despite a rare period of underperformance for our Frontier Markets strategy in the fourth quarter, the strategy continues to deliver notably strong relative performance across all medium and long-term periods. Lastly, the Emerging Markets Select strategy fell slightly short of its benchmark in the fourth quarter, despite significantly outpacing it over the one-year period and two years. The strategy continues to post an impressive track record, outperforming its benchmark by over 9.5% since its inception in 2021.
So, before moving on, I am pleased to highlight that two Fiera Funds and one Fiera Strategy have been recognized as top performers in the Global Manager Research 2024 Top Performer Awards. This is the second consecutive year Fiera Capital has been recognized as a top performer by Global Manager Research and is a testament to the effectiveness of our Public Market strategies, all of which are built on diligent research, proactive management, and a strong commitment to sustainable growth. Now, turning to our Private Market platform. Private Markets delivered positive net organic growth during the quarter of approximately CAD 200 million and close to CAD 1.4 billion for the year, after returning capital of CAD 184 million and CAD 556 million, respectively, to investors.
Growth was driven by new mandates of more than CAD 300 million for the quarter and CAD 1.7 billion for the year, primarily from clients into real estate, private debt, and agriculture. Close to CAD 600 million was deployed in the quarter, and we maintain a pipeline of roughly CAD 900 million available for future deployment into future opportunities. With respect to investment performance, our key Private Market strategies performed well in the quarter, with nearly all strategies generating positive returns for the quarter and producing absolute returns of 4% to 12% for the year. Private equity performed well in the quarter and produced a one-year return of 11%. Our approach here remains focused on selective investment in high-growth sectors, with particular investor interest in technology and health services.
Our Global Agriculture strategy performed well in the quarter and generated a 9% return for the year, with the strategy maintaining a robust pipeline of new partnerships and potential bolt-on opportunities. Our infrastructure strategy generated a positive return in the quarter and returned 9% for the year. In real estate, markets in Canada and the U.K. showed further evidence of recovery in the quarter after weathering a difficult valuation environment from 2022 to early 2024, enhanced by rate cuts and improved liquidity conditions. We remain strategically heavily weighted towards multi-residential and industrial sectors, with limited exposure to the still challenged office sector. Now, lastly, nearly all of our private credit strategies generated positive returns for the quarter. In particular, our real estate debt strategies performed well, generating attractive and low-volatility returns, as well as steady cash distributions.
Central banks in the markets that we operate have continued to cut rates and signal for more potential rate cuts over the coming months, and we are continuing to see demand for loans ramp up as lower rates and costs are allowing more projects to become economically attractive. Private Wealth assets under management increased by approximately CAD 300 million in the fourth quarter to close at CAD 14.6 billion. Assets under management were up close to CAD 1 billion on the year, driven by market appreciation and approximately CAD 700 million in gross new mandates. We continue to refine and simplify the team and value proposition to strengthen client relationships and drive sales growth. Now, with that, I will turn it over to Lucas to review our financial performance.
Thank you, Jean-Guy, and good morning, everyone.
I will now review the financial results for the fourth quarter and full year, which were driven by solid year-over-year growth and base management fees in both our Public and Private Markets platforms. Starting with total revenues. Across our investment platforms, total revenues of CAD 184 million in the fourth quarter declined by CAD 27 million, or 13% year-over-year, primarily reflecting lower performance fees in the fourth quarter of 2024 when compared to the same quarter last year. Lower performance fees from the investment strategies in our Public Markets drove the year-over-year performance fee decline, particularly when compared to a significant outperformance we experienced in 2023. For the full year, total revenue increased CAD 2 million to CAD 689 million, as good growth in base management fees and higher other revenues were largely offset by the lower performance fees.
Base management fees rose to CAD 157 million in the quarter, increasing 6% year-over-year, reflecting growth in both Public and Private Markets AUM. For the year, base management fees were CAD 612 million, up 3% or CAD 19.8 million from the prior year, driven by higher average AUM, along with a higher share of fees from asset mix shift into Private Markets and towards higher fee mandates. As a result, our average fee rate increased to 37.4 basis points for 2024 when compared with 36.6 basis points for the prior year. Turning to Public Market revenues. Base management fees of CAD 108 million in the quarter increased by more than CAD 5 million, or 5% year-over-year, primarily due to higher revenues from financial intermediary clients in the U.S. and institutional clients in Canada and Asia.
For the year, base management fees of CAD 424 million were almost CAD 6 million higher compared to 2023, this despite sizable outflows experienced during the first half of the year related to PineStone sub-advised mandates. Performance fees of just over CAD 5 million for the quarter were down significantly from strong fees of CAD 32 million earned in the same quarter last year, as emerging markets performance was challenged in the latter half of 2024, particularly during the fourth quarter. For the full year, performance fees of CAD 8 million were CAD 26 million lower from the prior year. Other revenues of CAD 3 million in the quarter were essentially flat to the same quarter last year and increased by CAD 6 million for the year, mostly reflecting revenues related to a prior year insurance claim.
While we are disappointed by the ultimate level of performance fees earned for the year, we are nonetheless pleased with the resilience of the base management fees generated by our Public Markets platform, which, despite the adverse impact of outflows related to the PineStone sub-advised mandates and lower fee fixed income strategies, were positively impacted by CAD 1.5 billion in new mandate wins across our Canadian, U.S., and Atlas Global equity strategies. Positive market environment for the year further helped us grow our Public Markets equity platform, ex-PineStone, from CAD 29 billion at the beginning of the year to CAD 35.4 billion by the end of the year. Now, turning to Private Markets revenues. Base management fees increased by CAD 4 million, or 9% year-over-year, to CAD 49 million for the quarter. Base management fees for the year of CAD 188 million were CAD 14 million, or 8% higher compared to 2023.
The increase was largely driven by higher institutional assets under management in our agriculture, real estate, and infrastructure strategies. Performance fees were CAD 8 million during the quarter, or CAD 2 million lower year-over-year, mostly due to the timing of performance fees recognized from agriculture and private credit funds, as a portion was recognized in the third quarter, as mentioned in our last earnings call. On a full-year basis, performance fees were close to CAD 17 million, or CAD 1 million higher from the prior year. Year-over-year, commitment and transaction fees were flat for the quarter at CAD 7 million. On a full-year basis, commitment and transaction fees were just over CAD 16 million, down by CAD 2.5 million versus last year.
Share of earnings and joint ventures related to our U.K. real estate business were CAD 2 million in the quarter, a decrease of CAD 7 million year-over-year, related to the timing and completion of our joint venture projects. However, for the year, share of earnings and joint ventures of CAD 12.5 million were up CAD 1 million from the prior period. Overall, we were very pleased with the results of our Private Markets platform for the year, which contributed revenues of over CAD 241 million in 2024, up CAD 17 million, or 8% from the prior year. Revenues from Private Markets contributed 37% of our total revenues for the fourth quarter and 35% of total revenues for the year, despite accounting for just 12% of our total assets under management. In today's unpredictable economic and political environment, our Private Markets platforms continue to provide attractive revenue diversification and margin growth to our business. Turning to SG&A.
For the fourth quarter, SG&A expense of CAD 140 million increased just 3% year-over-year. Important to note that when excluding share-based compensation expense of CAD 9.5 million during the quarter, SG&A was actually down 2% year-over-year. The higher share-based compensation for the quarter was due to the acceleration of certain long-term incentive awards and is not reflected in the expected run rate for share-based compensation expense going forward. For the year, our SG&A expense totaled CAD 514 million, up CAD 21 million, or 4% from the prior year. Higher expenses were largely from higher compensation costs and higher travel and marketing costs related to our regional platform expansion, partly offset by lower sub-advisory fees related to lower performance fees generated during the year. Turning to Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA of the quarter of CAD 53.4 million decreased CAD 24 million, or 31% from the same quarter last year.
For the full year, our Adjusted EBITDA was CAD 196 million, down CAD 10 million, or 5%, reflecting the impact of lower performance fees in Public Markets. Adjusted EBITDA margin was 29% for the quarter, and for the year, Adjusted EBITDA margin was 28.4%, down from 30% in the prior year. We note that excluding the impact of performance fees from total revenues and performance fee-related expenses, full-year Adjusted EBITDA increased 3% in 2024, and our margin was comparable from the prior year. Now, looking at earnings. On an adjusted basis, net earnings were CAD 23 million, or CAD 0.21 per share diluted for the quarter, down from CAD 50 million, or CAD 0.37 per share in the same quarter last year, largely reflecting lower performance fees and the impact a foreign exchange revaluation had on balance sheet items.
For the year, adjusted net earnings were CAD 103 million, down 19% from CAD 126 million for the prior year, and on a fully diluted per-share basis, adjusted net earnings were CAD 0.94, down 6% on the dollar in the prior year. Turning to our financial leverage. Net debt was CAD 651 million at the end of the quarter, up approximately CAD 47 million from the same period last year, but down CAD 4 million from the prior quarter. Our net debt ratio increased to 3.3 times from 2.9 times from the prior year and increased from just under 3 times in the prior quarter. Year-over-year increase in net debt was primarily driven by negative impact from depreciation in the Canadian dollar through the year, the settlement of share-based compensation in cash, and the repurchased shares via our NCIB.
Funded debt ratio, as defined by our credit facility, increased marginally to 3.06 from 2.93 times in the prior quarter. Our last 12 months' free cash flow of CAD 87 million is down slightly by CAD 2 million from the same period last year. The decrease was due to marginally lower cash from operating activities and higher interest payments on debt, the timing of these payments being the main contributing factor, as year-over-year interest expense was relatively flat. We remain committed to delivering value to our shareholders as a fundamental pillar of our strategy. We repurchased approximately 770,000 shares during the year for a total consideration of CAD 6.1 million. Lastly, the board has declared a quarterly dividend of CAD 21.6 cents per share, payable on April 10, 2025, to shareholders of record on March 10, 2025. I'll now turn the call back to Jean-Guy for his closing remarks.
Thank you, Lucas.
Looking forward to the rest of 2025, the global economy and financial markets are facing increased uncertainty stemming from political agendas and policy implementation from the U.S. We saw risk appetite deteriorate significantly following the U.S. threats to impose tariffs on Canada, Mexico, and China, with investors flocking to the safety of bonds, the U.S. dollar, and gold. These developments have the potential to inject volatility across global equity markets and non-U.S. dollar currencies such as the Canadian dollar. The risk-reward trade-off is not currently attractive for traditional stocks and bonds. This volatile backdrop highlights the case for non-traditional sources of income such as private credit and real assets, given their stable return profile, low volatility, and diversification benefits. With inflation set to remain higher than it's been for the past several decades, real assets will play a critical role in protecting purchasing power.
Farmland and agricultural commodities generate value in real terms as prices rise, and our Global Agricultural Fund is poised to benefit with minimal exposure to countries targeted by tariffs. Infrastructure has the potential to yield predictable cash flows that are uncorrelated to the economic cycle, with contracts that frequently include built-in protections against inflation. Finally, real estate, which has long been considered a good hedge against inflation, is set for a recovery in the coming years as interest rates are poised to decline. The depth and breadth of Fiera's investment offering provides a unique opportunity for our clients and provides us with a diverse revenue stream during times of financial markets uncertainty. With the drag of significant PineStone-related outflows largely behind us, we expect to return to a sustainable level of organic net inflows leveraging the strength of our regionalized distribution model.
So I will now turn the call back to the operator for the question period.
Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Gary Ho from Desjardins Capital Markets. Please go ahead.
Thanks, and good morning. Jean-Guy, thanks for your comments, especially kind of the latter comments that you're seeing in the market more recently. And I think you mentioned private credit and real assets, agriculture, etc.
Are you seeing increased interest from clients wanting to put capital into these strategies, and how quickly can you deploy these into those asset classes? Yeah, we'd like to hear some comments from yourself and/or Jean-Michel.
I'll answer it, but I'll pass it on to Max because he sees a lot of that in the Canadian division. We're seeing a lot of interest and increased activity on the U.S. side, especially in our agricultural fund, as a result of two new consultant organizations putting our ag strategy on their buy list, and we are already seeing a significant impact from that. As you know, it's very often the door to a successful distribution, so that's quite encouraging to see that, but overall, we are seeing a lot of activity on the ag fund. We're seeing a lot of activity on our credit funds.
These days, especially the corporate credit one, where we're continuing to raise a significant amount of money in our Fund VII. We have some very significant and interesting prospects from a couple of insurance companies that are seriously looking at investing in the fund. We're also seeing quite a bit of activity on the real estate side because, as you know, our two, I'd say, leading real estate strategies, which is the Core and the Industrial Fund, are rated, have performed number one and number two in the competitive or in the survey of our competitors. Maybe, Max, you can add to what I just said.
Yeah. Just to add to this, yeah, so the consulting community is really important in our ability to introduce Private Market solutions.
As Jean-Guy mentioned, we are seeing a positive momentum in reviewing the agriculture, which is not a new asset class, but it's a sort of less understood asset class. We have probably one of the best funds worldwide, so we have something very interesting to offer the market. So we're seeing a pickup on the consulting side, and that triggers immediate interest from the client base. So this is real activity, not only here in Canada, but in important markets like the U.S. and also the EMEA market. On the corporate side, as Jean-Guy mentioned, our corporate credit side, we are finalists in a number of fairly large tickets, and we are unfolding a very effective cross-sell initiative across our existing client book of business to introduce Private Markets generally.
So the performance is obviously a key composition of your success, and having real estate and some of our strategy being some of the best is very important. Again, consultants are driving the searches. So we're seeing a good pipeline, which should result in positive flows in the next few quarters.
Okay. Great. Thanks for that. And then my second question, just wanted to ask about the performance fee delta in Q4 this year versus 2023. So that's roughly CAD 28-29 million. So maybe a two-part question, perhaps for Lucas. One, what was the cash flow impact of the CAD 28-29 million performance fees? Is 50% a good kind of ballpark if we kind of back out compensation-related expenses?
And then two, if we look at Slide 22, where you show your LTM free cash flow of CAD 87 million for Q4 2024 LTM, remind me, that still includes last year's performance fees and not 2024. Just wanted to see if you can confirm this.
Yeah. Thanks, Gary. That's a great question. So let me break that down for you. I guess to your first part, sort of the expense ratio on those fees in particular, yes, your assumption is correct. So 50% is a good number. When you get into the cash flow, however, there's a couple of intricacies. Sort of we need to recognize that the quarter in which the performance fee is earned, it helps your operating cash flow before working cap, but it's a drag on your working cap from the perspective up until the time that you collect the performance fee.
So as you'll recall, last year, actually, we had a pretty significant drag on free cash flow, and that's because of the drag on the working cap that we had. So that 50/50 doesn't apply to the cash flow statement. And so while it's true on the face from an EBITDA perspective, there's a mechanics there that happens with the cash flow that separates the timing. I think at the heart of your question is sort of where is free cash flow going? And right now, I can tell you that we're predicting to have Q1 be in line with where we were in Q4 and not suffer a decrease the way we saw last year. As I say, the timing of the collection of those performance fees and other fees in Q1 of last year caused some distortion.
So sorry, maybe a finer point.
Why wouldn't, because that's the LTM number, why wouldn't that CAD 87 decrease? Is it maybe a Q2 event then?
No, because what happens is, yes, while we had a lower year relative to performance fees, keep in mind that our base management fees are up almost CAD 20 million going into the year. And so we're entering into the first quarter of 2025 with that base management fee increment and that AUM rolling into the first quarter. So as long as markets keep up the way they have so far, and that actually even factors in the PineStone outflow to Canoe, which we're already expecting. So as I say, we're targeting to be on par in the first quarter with free cash flow.
Okay. That's helpful. Thanks. Those are my questions.
Once again, if you have a question, please press star one. And your next question comes from Graham Ryding from TD. Please go ahead.
Good morning. Maybe just a little bit of color or commentary around the flows in the quarter. I thought the commentary coming out of last quarter was the pipeline looked pretty good looking into Q4. Just wondering, were there some outflows that surfaced in the quarter that were maybe a surprise, or were there any mandates that maybe got pushed into Q1, and it's a timing issue?
Yeah. I think it's a combination of all the above. I think we got Q4 a bit of a surprise on one of the outflows from a PineStone transfer. And I think, and again, just to manage expectation, but some of the pipeline was transferred in Q1, of which we're currently tracking favorably. So Q4, sometimes things are a little tough to sign up.
The strong pipeline was transferred over the next quarter, and AUM should be on the second quarter at the worst. But first half of 2025, you should see some of that pipeline materialize. Yeah. And on the negative net contribution, which was really the offset there, we had some rebalancing in fixed income again, particularly in LDI. Again, while we had new mandates positive of CAD 1.2 billion for the quarter, it was really the negative net contributions of negative CAD 2.5 billion that hurt us.
Okay. All right. Understood. It's helpful. Share-based comp, can you just reiterate or flesh out what drove the elevation this quarter and what's a reasonable run rate?
Yeah. So we had a couple of plans that we accelerated this year just by virtue of shifting structure going into 2025. So that easily contributed about CAD 4 million to that number.
And then on top of that, we had an extra CAD 2 million increment, which was really based on sort of the valuation. So when we calculate our share-based compensation, it's sort of we take the price of the share at the end of December, which was at a pretty good level, certainly compared to where we are today. So that added about CAD 2 million of pressure to the calculation of share-based comp. I would say that for the year, a good run rate going into next year would be about CAD 20 million. As you'll recall, this year we had very low share-based compensation in the first couple of quarters. So I would say factoring in CAD 4 to CAD 5 million per quarter is a good direction to take.
Okay. That's it for me. Thank you.
And your next question comes from Jaeme Gloyn from National Bank Financial. Please go ahead.
Yes. Good morning. Sorry if I missed this in the prepared remarks, but just wanted to get your perspectives on the leverage ratio ticking higher this quarter to 3.33, and if I recall, correct me if I'm wrong, but the bank covenant is 3.5, so correct me if I'm wrong on that, and then just some thoughts around how you're thinking through leverage for the coming year.
Yeah, so the 3.3 is the overall net debt ratio. By the bank coverage ratio, we were under 3.1, and that's the one to compare to the 3.5, and quarter over quarter, the actual amount of debt was consistent. Why you're seeing an uptick in the ratio is actually what happens is, as you're calculating the ratio, we're now going into a lower revenue quarter compared to fourth quarter of last year.
So that's effectively impacting the EBITDA in your calculation, but it hasn't changed the denominator and the numerator in the calculation, if you will, in terms of the debt. So that's why you're seeing the uptick quarter over quarter. But the absolute level of debt is consistent from Q3. And I mean, in terms of how we're thinking about it going forward, I think was your last question, sort of depending on working capital needs for the next two quarters. Again, as you know, our first two quarters of the year are usually always our heaviest. First quarter with regards to benefit charges, second quarter with regards to the two dividend payments that need to be made. So while we could see an uptick again in the next couple of quarters, we always expect that to normalize and go back down in the third or fourth quarter of the year.
Okay. Okay. So still comfortable with the level today, and not expecting anything to shift that view is my takeaway there.
Correct.
Yeah. So the next question is just, I mean, you're speaking. I hear the confidence in the tone around PineStone that it'll be a billion sort of this year and I guess maybe annually for a couple of years. You provided some color around that, and I think I got tripped up on some of the numbers that you guys were providing.
But maybe if you can kind of flesh that out where it sounded like you still have several mandates that are a billion in size or roughly around a billion, what gives you confidence that you're not going to see one of these mandates look to take their AUM to PineStone at some point in 2025 or even a couple in 2026 or something along those lines? Just wanted to get more confidence from you guys on that, just given the tone that you're presenting
I'll take some of it, and maybe, Lucas, you can either correct me or add to it. Since over the last three years when the leakage started, which is 2022, 2023, 2024, 85% of the leakage that went to PineStone are intermediaries, and we can easily understand why.
I mean, I don't have to go through it, but I think it's a low-fee business, and that requires a lot of, I'd say, time, effort, and service from the manager doing roadshows and all that stuff because they're all intermediaries. It's all mutual fund stuff being distributed to the retail market, so the rest 15% has been institutional clients, so if you exclude intermediaries, there's been very little leakage from institutional clients, and without going through it, we have good reasons to explain for that. It has to do with the fact that many of the clients who are still with us, we do more than one investment strategy with them, so the relationship is much broader than just the PineStone relationship.
And also, because they obviously seem to be quite comfortable and satisfied with the value added that we bring to the relationship over and above the portfolio management expertise that PineStone offers to the client through us. So there's been a pretty much high degree of stability from our non-intermediary clients over the last three years. And intermediary clients, there's one left with whom we have a very, very solid relationship and have a very high degree of confidence that it's not considering leaking to PineStone. Other than that, there's none. So looking at our experience of the last three years, plus a number of other variables that I don't think need to be mentioned here, we are pretty optimistic that the level of leakage growing into 2026 because, as you know, this year we already were impacted by Canoe this year, 5.5.
So if you look at it post-Canoe, starting next month, we expect that the pace of leakage, the rate at which leakage will occur, will be significantly lower based on our experience of the last three years as it relates to non-intermediary clients, which I think is a reasonable assumption to make at this stage. So we're always ready for the bad surprise, but we're also at the same time optimistic that the worst is well behind us there. Lucas, you want to add something to that?
Nope. Nothing to add. That's good.
Okay. I'll go back in the transcript and catch some of the data points that you shared earlier on. Okay. I think that's good for me. Thanks, guys.
Once again, if you have any questions, press star one. There are no further questions at this time.
Oh, we have one more question from Jaeme Gloyn from National Bank. Please go ahead.
Yeah. Sorry. I thought I would turn it over, but I'll sneak one more in just around the regionalized distribution model and the confidence in, let's call them, core net flows coming through in the Q1 or potentially in H1. Are you able to share any color thus far in so far through almost two months of the quarter? What has been the experience of the results thus far? Can you give us an indication or a hint as to the strength of the non-PineStone net flows so far?
I'll just share with you what I said to the board going back to the beginning of 2023, where I presented to the board and they approved the decentralization of our distribution capabilities into a regional model and spent pretty much all of 2023 to put it in place, where the last two regional leaders, Maxime being one, and Eric in the U.S., who's running the U.S. one, came in very, very late in the year and said to the board that 2024 would be obviously a year in transition with the new four leaders on board, EMEA, Asia, U.S., and Canada, and that as long as we can see the beginning of some progress in 2024, 2025 would be a very important year to pass judgment on whether the model is the right model, but very importantly, whether the four regional leaders were the right ones to execute and make things happen.
And right now, you said after two months this year, but I could have said by somewhat the third and fourth quarter last year. I could see that the momentum was building up, that the business model was doing what it was supposed to do, which is generating a lot of activity, building up the pipeline, and getting a lot more attention. And honestly, over and above that, a much higher degree of professionalism and being close to the market where you're trying to distribute your strategies. So I am quite optimistic at this stage that I have at least three of my four regional leaders I'm very, very happy with and have proven themselves enough at this stage.
One of them, I still believe, is the right one, but is a little bit late against the other three, which leads us to us, me, my partners here on the board, to be quite optimistic about the results and the impact that we will be experiencing in 2025 from that significant initiative. We invested quite a bit of money in that restructuring and moving to that regional distribution model. And in fact, where we can see the greatest immediate impact under Maxim's leadership is in our Canadian division, which is really doing well.
Okay. Thank you.
There are no further questions at this time. Ms. Guay, I will now turn the call back over to you.
Thank you, Emily. That concludes our call today. And if you'd like more information, do not hesitate to take advantage of our website at fieracapital.com. Thank you for joining us. Merci.
Ladies and gentlemen, this concludes the conference. You may now disconnect your.