It's a pleasure to introduce our next guest for this afternoon, Mr. Maxime Ménard, Global President and CEO of Fiera Capital. Maxime, it's great to have you here.
Thank you.
I could say it's a welcome back as well.
Yeah. Thanks for having me. Thank you.
Good to see you. You have been Global President and CEO for Fiera for over a year, and have been at Fiera, I think since the beginning of 2024.
Yeah.
When you look across Fiera today, where do you think the business has made probably the most progress under your leadership, and what are the biggest priorities from here?
Yeah. I like to keep the business fairly simple. There is always three important components, two of which are around the business. Again, I think the performance is extremely important, how we operate, focusing our entire organization around performance. The other one is around servicing clients and some of the improvements we have made there in terms of our distribution. Lastly is sound operational cost saving. What we have done from an investment standpoint over the last little while was really focusing on breaking down the silos. Our business had Private Markets and Public Markets. We used to operate these two businesses with two different CIOs. What we did is we created what I call the Global Investment Office, which is effectively the combination of those two CIO offices. We have a go-to-market strategy that focus greatly on the multi-asset platforms.
Having the combination of the two, really helps us out. We are focused on making sure that our platform is diversified. From a style perspective as well, I think we are a little tilted towards quality growth, as I like to say. Unfortunately, quality growth managers have been struggling a little bit lately. Clients are looking for lesser of a tracking error kind of portfolios in the market, ironically, where they used to ask us to have high conviction bets or high conviction investment portfolios. I think from an investment standpoint, having a Global Investment Office has really helped us first, bring all the investment teams together, making sure that we speak to what we are from a multi-asset solution basis.
From a servicing standpoint, when we talk about go to clients, I think how the market has evolved over the last few years is the institutional market has become extremely customized. Clients are looking for more than investment products. They are looking for investment solutions. Whether it's fixed income, Public Markets, or even the integration of all the platform, our success over the last little while has been around being able to service clients for their needs. It's a simple thing to say, but when you look at mid-market institutional and how these different clients are evolving, some of the insurers have capital requirements, and we are able to develop some fixed income solutions or private credit solutions that allows them to have lesser extents around the capital ratios.
When we look for example, one of the good example of what we have done here in Canada is to build a customized solutions for unions, where we are integrating a component of employments for the union workers and also returns on investments. So we have done that with real assets portfolio and real estate equity, and with infrastructure. That requires more than just launching products. It requires some thinking, and it requires a high level of sophistication when it comes to product evolutions. From a cost-cutting operation over the last, call it last year, it's been a lot around right-sizing the organization. I talk about cost-cutting, but it's not the right term.
The right term is really we are trying to right-size the organization because, in the backdrop of what we are all going through today, whether it's the war in Iran or whether it's commercial tariffs, which are ever-evolving every day, we are in the business where we have a lot of things that we don't control, including the markets. We have to make sure that we are agile, that we have the right capital structure, but we also have the right cost structure. So we have put in place a way for us to be able to mitigate some of the risk around costs. I think we have been very successful at it for the last little while.
Okay. You spent almost two decades in the asset management industry and also as a direct competitor prior to joining Fiera. What do you think differentiates Fiera and provides competitive strengths? Again, has that view actually evolved since joining the firm?
Yeah. So you pointed out, I spent 22 years exactly at Jarislowsky Fraser, a previous firm. And one of the things I learned about, call it a single purpose organization like JF or a single style organization is, you really have no options when things are not going your way in terms of style. You have to learn to identify your differentiating factor. You have to learn to sort of live and die by your performance and identify what makes you different. When I apply this today to Fiera, I think some of the things that are extremely differentiating for Fiera, again, we're independent by nature. I like to say that we do only one thing, which is investment. So we're not bound by any conflicts when it comes to investments. And we probably have the most robust multi-asset investment platforms in the market.
How we are trying to develop these things over time, I think we were probably some of the first in 2008 to come out with Private Markets and open-ended solutions. We identify these differentiating factors, and we make sure we come to clients with solutions over products. How we hire people, the people we have in terms of our investment teams, and how we're able to go to market and develop those solutions is extremely important.
Okay. And what's the ultimate vision for Fiera, and what needs to happen to get there?
Yeah. Number one thing is I want to be the place, or we want to be the place to attract the best investment professionals. Because that's the core of who we are, right? We're a house for talent to come in, perform their craft. We are trying to put in place the best competitive environment for investment professionals, whether it's around compensation, whether it's around technology investments, around operational efficiencies. And also, as a lot of PMs would say, we have to be a powerhouse in terms of raising assets because at the end of the day, this is what the business is about.
We are creating an environment where I believe investment portfolio managers that are looking to be on their own, so to speak, and be entrepreneurial, but yet don't want to go through the hustle and bustle to build their own firms, which could be taking you away from your day-to-day job, which is picking stocks. That's really the right level of entrepreneurialship that we're providing to investment portfolio managers. This is what we want to be. By attracting the best investment portfolio managers in the business and creating the best investment solutions, we want to become the premier investment solutions for the market.
Okay. Let's dig in a little bit on Private Markets. I think it's probably not well-recognized, but almost, I think a third of Fiera's revenue is from Private Markets and certainly remains-
Yeah.
-one of the clearest growth opportunities. Fiera is not new to Private Markets by any means. Maybe you can share what drove the company's decision to focus and expand on the segment and why now is really the right time to continue that push.
Well, I won't take the credit for launching it in 2008. I was a fierce competitor to Fiera back then, and I was very impressed with how Jean-Guy and team were able to develop open-ended Private Market solutions. You see now a lot of global players in the Private Markets developing those open-ended solutions, not only for retail, but also institutionals, and mid-market are also interested in open-ended solutions. Fiera's been in this market for a very long time. It takes time to develop these very complicated solutions, and it also takes time to create liquidity for an underlying asset that is illiquid by nature. Why we think this is important, obviously, that sounds very opportunistic to say today, but I think it's a very important asset class for investors. It's an important asset class for investors from many standpoints.
It's a good alternative for fixed income, particularly when you're going through a low-yielding environment for fixed income. Alternative assets or private assets could offer a more robust yield, more predictable in terms of returns, with obviously the discount of liquidity. When you add to it an open-ended solution, which could create, at time, a little bit more liquidity, then you really have the best of both worlds. We couldn't really call ourself a fully multi-asset platform if we didn't have the Private Markets solution. We have developed this to a point where I think today we're probably one of the best firms in Canada in terms of offering for retail markets, but also for mid-market institutional. As we see the future, I see there's an increasing demand for these types of assets. We see a lot of growth within the private credit.
We see also a lot of growth within infra-debt, infra-real estate, and we're going to continue to add onto this.
Okay. You want to maybe provide a bit of color on some of the capabilities and the chosen areas of focus, and also what capabilities you might look to add going forward?
Yeah. Again, I'm going to add what the client wants, right? We're looking at what the market is looking for, and I think there's a lot of demand within the private credit business, not only corporates. When I look at the suites of products within private credit, there's the real estate debt that has a lot of appetite. We're currently looking at developing a solution set around global real estate solutions, and that's a combination of all our real estate businesses. We have an Asia real estate debt business, European real estate business, Canadian obviously, and a very good U.S. real estate debt business. When you combine all these different capabilities under one wrap, then you have really the best of all the world in terms of real estate debt. That's a very complicated market to tap into as an investor.
As a consolidator of this capability, I think we're going to see some success. This is going to be something that is Canadian and European by nature for investors. As you can imagine, Americans or U.S.-based investors would tend to be more U.S. real estate debt. Each of those different components will play their own role in their own market, but we'll have that global component. That's one thing. I think there's also an important component of infra-debt. We see a lot of equity deployment capital within the infrastructure market, but within the debt as well, we see a lot of opportunity, and we're going to continue to expand on our agriculture fund, which is the largest open-ended agriculture fund in the world.
This is through a joint venture we have with Comox, which was launched a few years back, but now we've seen a lot of pickup. Most of the people looked at agriculture before as a subset of infrastructure, and it's become its own asset class on the searches through years of educational, and I think this is going to be a very interesting asset class going forward.
Okay. So within the Private Markets business, where are you seeing the most momentum, and what kind of AUM growth are you targeting over the next, call it, three to five years?
Three to five? Our CFO's just sitting there. I would say a double in Private Markets. The reason is, again, there's a number of things for this. Again, I think we are coming to maturity when it comes to performance. A lot of these solutions need to have a track record, and we're getting some serious track record, very competitive track record in some of our Private Market solutions. There's also an indication from all of the global surveys we could look at that Private Markets in general is going to be an increased asset class as in asset allocating. Then if you look at the sub-sector of asset allocations, I think, as I mentioned, credit is going to be one. Private equity less, and anywhere in between you'll see more into infrastructure, real assets, infra-real estate.
You will have seen some of the big pension owners deploying significant capital in infrastructure. Canada has also built their own infrastructure fund. I think there is a lot of appetite for developing their own infrastructures, and we are going to be as part of that wave. If I am looking for specific products, again, I will really looking at the three credit solutions around infra-debt, infra-real estate, and private credit, corporate credit.
Okay. You talked about open-ended funds, but also maybe just talk a little bit about how you differentiate the Private Markets offerings really in what is an increasingly competitive environment.
The open-ended funds? Yeah. I think our differentiating solutions is in itself the fact that we are open-ended solutions. I made a comment earlier in one of the meeting I had where there is a lot of discussions around illiquid or a queue or different things, different characteristic that comes from investing in private assets. When you tap on an element of open-ended solutions into an illiquid assets, you are really combining two things that are kind of counter indicative in how they operate. We are playing this role where we are trying to bring illiquid assets into a liquid situation. What we are trying to do really is trying at our very best to protect performance along the way.
Some people sometimes are highly critical of, "Oh, you guys have a queue in one of your open-ended solutions." The only reasons we have a queue in an open-ended solutions is to protect performance for investors. It is not unlike, for example, if you are trading a public stock and you see, for example, a very illiquid public stock, family-owned business, of which we have had experience in the past where we had to sell those positions, and they take months because they have less liquidity. To a different extent, I think we have created open-ended solutions that have regular outflows possibility, lots of liquidity, somewhat less restrictive than most of our competitors, and the vast opportunities we have within these different segments. We have sponsor-backed credit, we have direct lending, we have real estate infrastructure, we have all of the different solutions.
This was built over the last 20 years. Fortunately, I come into a place where this is fairly mature at CAD 22 billion of private assets. We are one of the largest private assets money manager in the country, and we have the opportunity to build on that, to hopefully in three to five years, to answer your questions, we get to north of CAD 40 billion of private assets. Which as you mentioned earlier, is a third of our revenue, but it is only 10% of our assets.
Excellent. Do you think, is there a prosperous future for small to mid-size firms in the context of some reaching trillion-dollar kind of AUM? Is the economic and strategic benefits of scale too large to overcome here?
I am CAD 160 billion. I am a big/small asset manager. From a Canadian perspective, we are a large asset manager. When I get into the trillion, I am intimidated a little bit. I think, and this is a personal opinion, scale is very important to business, right? Because of the cost of it. We used to say historically it is costly because of compliance, legal, operational efficiencies, all of these simple things. Now, technology is becoming a very expensive part of the business. As our competitors are investing into technology, you decide how costly this is. If you are not investing in AI, you are not investing in technology, you are not investing in the future of the business, you are going to marginalize yourself, in my opinion. You want to be the big player, you need to invest in technology.
You need to make sure you stay within the course, or else you are going to become, as they say, marginalized. In terms of the smaller managers, I think if you are nimble, if you add a ton of value and you are very specific, there is a place for this. There is a place for this as long as you perform, obviously, and as long as you stay true to what you do. As soon as you get into the multi-assets, as soon as you get into multi-strategies, then scale becomes your play. Maybe it is an acquisitive environment where the bigger players are going to be acquiring these boutique firms and consolidate the distribution, right? Distribution is a very big component of this globally.
As you see the consolidated market in Canada, for example, the banks, the insurance, the DC, the consultants, there are not many places to go to get sort of the fringe market and getting market share. It is very complicated. If you are going to be small, you have to be an expert at something, in my view. If you are going to be somewhat big, you have to be big enough to scale. But being anywhere in between is going to be a really tough place to be.
Okay. Let us shift gears a little bit, and we will talk about distributions, flows, and some of the partnerships. I think you spent some time recently taking elements of the specialized Canadian distribution model and moved that into kind of U.S., Europe, Middle East, and Asia. So where are you seeing the strongest evidence of this kind of gaining traction, and maybe where is the progress being a bit slower than expected?
Yeah. Fiera is a powerhouse when it comes to distribution. My background is distribution. I thought I was pretty good until I joined Fiera, to realize that they really have it. The core of the investment at Fiera is extremely important, as I said. You cannot differentiate yourself unless you have performance. But the go-to-market Fiera strategy is really good. The way we have done it, because you do have Private Markets and Public Markets, and you do want to go to the market with solutions, you need to have a high level of sophistication when it comes to conversations. They are usually different people. You go to pension owners, and you have somebody looking after Private Markets and somebody looking after the Public Markets. Within these different sectors, you have sub-sectors.
When you show up to pitch real estate debt or you are going to talk about real estate equity, you better know what you are talking about if you want to have any shots to get to the finals. What we have done is we have done a full segmentation in terms of sectors of expertise within Private and Public Markets. We also, as I said, have a centralized unity that is called the Global Investment Office, that focuses on solutions, right? Those solutions, again, are built customized. They are usually actuaries that we have on staff, are going to work with us in terms of building solutions for private credit, Private Markets, and also for fixed income for the clients. We go to clients as a team. So it is a really team-based approach in multi-asset in Canada. Where it has been a bit slower, and it has been humbling, is internationally, right?
Because when you get into the U.S., when you get into EMEA, Asia, it does sound very appealing from the size of the market, but the players skate fast. You got to be sure you develop solutions at a very fast pace. Otherwise, if you're the fifth guy or the hundredth guy showing up at the door, it's already filled, so there's no opportunity. We realized that our ability to differentiate ourselves in that market as a multi-asset manager is nonexistent. We can't. We had to realize that we're not going to be a multi-asset manager in the U.S. or EMEA or even Asia or the Middle East. We're going to be a specialty manager. We identified, call it, a handful of really good solutions, and we're tracking them.
It's a really salesy exercise when it comes to the U.S. because you have to adapt yourself to the market you're in. The salespeople, the process, the follow-ups, the way they operate in the U.S., the way they operate in the international markets with these big players, the Blackstone, BlackRock, all of them have consolidated. They've partnered up with other managers. They're a powerhouse. They raise billions of dollars. You come in, it sounds good in Canadian dollars, but even when you knock it down by a notch in U.S. dollars, you're becoming a smaller player. A CAD 160 billion player in a market where guys are trillion-dollar businesses and already have very large strategic relationship, you really have to differentiate yourself to gain any market share. For example, I take the agriculture fund. That's a high differentiator in the market.
From a performance standpoint, from an expertise standpoint, we have a shot to win. We have a place at the table. Now we have to show up and do it the way that market predicts it.
Okay. Well, listen, flows are a focal point for investors when talking about Fiera. Once, I'll call it, the known PineStone redemptions run their course, what needs to happen in the underlying business for Fiera to sustainably return back to, I'll call it, positive organic growth?
That's the tough question. Positive flows in the business are made up of two things, gross flows and net redemption or gross redemption, which makes up the net growth of the business. As you said, we've had some headwinds from the PineStone of two buckets, really. We've had headwinds from a leakage perspective, which were assets that were transferred directly to the PineStone, which I think we're coming to an end for a number of reasons. Also, the other assets are proprietary assets, multi-assets. They're within our complex. We own those relationships. The other element is the performance. As I said, we're faced with a bit of a quality growth manager style within our platform, which is putting us in a place where we need to be sure we explain.
As I said earlier, my earlier experience at my previous firm, we need to train our people to explain really well the story so that we mitigate redemption, and that's what we're doing. The other part, fixed income, is doing really well from a performance standpoint, so we're seeing some net positive flows there. Generally, within our Private Markets, we're seeing a lot of positive flows. What needs to happen for us to get there is the combination of all of this. On the international market, we have to make sure that those handful of solutions that we're supposed to sell, we sell them, we track them, we follow up. I was reading something very interesting. The most successful people in those different markets internationally are-
Okay.
That's what we need to focus on, making sure that in the international markets, we do what we need to do from a follow-up perspective. In Canada, we need to be present with our markets, making sure we educate our clients when things are underperforming, and focusing on the top line and introducing new solutions.
Okay. Do you see a risk of flow disruption given some of the changes to the Canadian equity team? More importantly, what actions are you taking?
Yeah. I think this has been talked about quite extensively. This is a people's business, right? When there's turnover, it gives a good opportunity for consultants out there to create a narrative around what just happened. Is there a risk of movement? There's always risk, right? When you change some of the fundamentals around process, philosophy, people, you have to be aware of this. Being aware of this is really important. I personally did all the consulting meetings, and I'm meeting with the most important clients to not tell them what's happening, but to hear what they have to tell me in terms of their perception of what's happening, and then I could respond with the reality. I think we've done a phenomenal job in the very short term to address those issues.
I'm very happy, and it speaks to the quality of our platform to be able to attract this level of calibers within our platforms, and I'm very well-informed of the caliber of people we were able to attract. I think we're actually going to end up with probably one of the best Canadian equity team in the business. We took a difficult situation and turned it into a great opportunity.
Excellent. Just in terms of closing thoughts here, if we look ahead 12- 18 months, what would success look like for Fiera, and what do you hope will be notably different from today?
Positive net flows. That'll be really important. I think we're going to reduce debt, a couple of things around that. And be successful in the key markets that we're trying to expand. We're a CAD 160 billion business. If we want to grow anywhere between 5%-10% a year, we need to grow outside Canada. Our market share in Canada is very significant or big enough. It's going to be tough to grow if you use the number CAD 16 billion a year, even if you put in a 5% market growth. We need to have positive flows outside. We need to slow down redemption where necessary. And most importantly, we need to have a good performance for our investors.
Excellent. Well, listen, Maxime, it's been a great conversation.
Thank you, Phil.
Again, I'd like to thank you personally for taking the time to do the chat, to meet with investors, and again, I'd like to thank the Fiera organization for your continued support. Thank you.
Thank you.