(Montreal) Vera Capital reported second-quarter results above analysts’ expectations, but the news was overshadowed by the change in its business relationship with its star manager, Montrealer Nadim Rizk.
Nadim Rizk, Head of the Global Equities Team, will launch a new company called StonePine Asset Management, in partnership with Fiera. Within this new Montreal-based company, Mr. Rizk’s team will continue to provide subsidiary advisory services to Viera.
The portfolio manager is a major player in the Montreal business. Since 2009, its franchise has seen its assets under management increase from 300 million to 60 billion. This represents approximately one-third of Viera’s $179.5 billion in assets under management.
During a conference call to discuss financial results, the majority of analyst questions centered on the creation of StonePine.
The agreement is really designed to make the partnership between the two parties last as long as possible. We both had an interest in continuing this long-term partnership.
Jean-Philippe Lemay, President and Chief Operating Officer of Vera Capital
The agreement includes, among other things, clauses prohibiting Mr. Rizk from soliciting Viera’s clients or developing strategies to compete with those for which he is working as a sub-advisor.
Graham Ryding of TD Securities believes that the deal strengthens the bond between the parties and reduces the risk of losing this major player. The analyst notes, however, that Mr. Rizk’s team was awarded approximately $7 million in shares. It is likely that this compensation will be paid as an administrative fee, which could reduce profits, he said.
On a more personal note, founder and CEO Jean-Guy Desjardins said he is very close to Nadim Rizk. “Nadim was haunted by the desire to prove his ability to go into business,” explains Mr. Desjardins. We made the decision last summer to prepare for this partnership in order to allow her to realize her dream while minimizing the risks for us. “
Pensions and the energy sector
Mr. Desjardins, 76, has also been questioned about his succession plans. The businessman refused to confirm when he would leave the managerial position: “I am three months closer than I was when you asked me three months ago.”
However, he made it clear that the succession plan had been underway for several months and that the chief operating officer, Jean-Philippe Lemay, was the expected dolphin. “Normally, in this kind of situation, the chief operating officer is usually contacted. Our case is no different.”
Questions were also asked about the performance of Canadian equity investment strategies. If they outperform the markets for three years, they have underperformed their benchmark by 4.35 percentage points over the past year. “We have very little exposure to the energy sector,” explains Mr. Lemay. I think the difference is due to the macroeconomic context, but that does not call into question the quality of our strategy at the moment. “
Results exceeded expectations
Vieira on Thursday revealed better-than-expected second-quarter results. Adjusted earnings per share were $0.36, compared to $0.38 for the same period last year. Before the results were announced, analysts had expected average earnings per share of $0.30, according to Refinitiv.
The Montreal asset manager increased the amount of assets under management by 4.2% over three months, to reach 179.5 billion at the end of the second quarter on June 30.
AUM grew with $25.9 billion added in new mandates, but was impacted in part by the sale of assets and the loss of some clients.
The net income attributable to shareholders of the company amounted to 13.3 million compared to a loss of 14.7 million in the same period last year. Meanwhile, revenue remained stable, rising 0.3% to $167.4 million.
“We are very pleased with our second quarter results and our performance in the first half of 2021, which are in line with the economic growth scenario we projected earlier in the year,” explains Mr. Desjardins.
The board of directors keeps the quarterly dividend at $0.21, which represents 80% of cash flow. The company also renewed the share repurchase program, which allows the acquisition of 4 million shares for cancellation, or 4.7% of the outstanding securities.
On the Toronto Stock Exchange, Fiera stock closed down $0.25, or 2.2%, at $11.01 Thursday.
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