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Monday, July 25, 2016

A $75B Canadian Asset Manager Buys a Fifth U.S. Shop

by: Neil Anderson, Managing Editor

A publicly-traded Canadian asset manager with $75 billion in AUM is making its fifth acquisition in the U.S. since 2013, and this time the target is a hedge-fund-finding specialist in the New York City suburbs, in Westchester.

Benjamin Thompson
Fiera Capital
President and CEO of U.S. branch
Fiera Capital, the New York City-based U.S. arm of Montreal-based Fiera Capital Corporation, is buying the assets of Rye Brook, New York-based Larch Lane Advisors, an SEC filing confirms. The deal is expected to close by August 31, and pricing and terms have not been disclosed. Fiera Capital has about $17.7 billion in AUM in the U.S. as of June 30, and Larch Lane has nearly $500 million in AUM.

"This is also an asset acquisition," Ben Thompson, president and CEO of Fiera's U.S. arm, tells MFWire. "We're essentially acquiring the strategies and then bringing the whole team on board."

Mark Jurish, CEO and chief investment officer of Larch Lane, did not return calls for comment on the deal.

In advance of the Larch Lane deal closing, Fiera is also taking over Larch Lane's mutual fund joint venture, the Rothschild Larch Lane Management Company. In 2014 Larch Lane and Rothschild Asset Management created Rothschild Larch Lane Management Company to launch multi-manager, liquid alternative, open-end mutual funds. On July 11, 2016, Fiera bought Rothschild's interests in the joint venture, rebranded the $59.4-million Rothschild Larch Lane Alternatives Fund as the Fiera Capital Diversified Alternatives Fund, and switched in Fiera Capital Management Company as the advisor to the fund. The fund is subadvised by Ellington Management Group, Karya Capital Management, Mizuho Alternative Investments, and Winton Capital.

Mike Woods, CEO of New York City-based Rothschild Asset Management, did not return calls for comment on the deal.

Thompson confirms that Fiera worked directly with Larch Lane on the deal, without involving an investment bank or M&A consultant.

"This is a very friendly, negotiated asset acquisition where there was a lot of preexisting knowledge and understanding of the individuals," Thompson says. (Indeed, Fiera Capital general counsel and chief compliance officer Stephen McShea previously held similar roles at Larch Lane.)

Larch Lane's "three key strategies with long track records of success," Thompson says, are the mutual fund, a 23-year-old hedge fund of funds, and a hedge fund seeding strategy. Thompson praises Jurish as "one of the pioneers of hedge fund seeding ... identifying emerging alternative managers and providing seed capital to those emerging managers." Larch Lane, Thompson says, has "a very strong and long track record in the hedge fund of funds world."

Several key factors, Thompson says, drove Fiera's interest in Larch Lane. First, the Fiera team has "a desire to build out greater alternatives capabilities, in Canada and the U.S.", and the Larch Lane team "brings substantial alternatives capabilities" into the Fiera fold.

Second, Thompson says, the Larch Lane staff is "very high caliber." Larch Lane has about 12 people including Jurish and David Katz, president and chief operating officer, and the whole team is coming over. The Larch Lane team, Thompson says, is becoming "fully integrated into the New York office" of Fiera.

"This is an opportunity with a group of professionals to kind of plug them into key roles that we've identified" as places to hire, Thompson says.

And third, Thompson describes Larch Lane as "very complementary with the current structure of the business" at Fiera.

"This enhances the mutual fund expertise, as well as the private fund expertise," in the U.S. at Fiera, Thompson says. He adds that Larch Lane gives Fiera "additional bandwidth to do things that are not in the traditional equity and debt space."

"It's a small team that is very complementary to what we're building in the U.S," Thompson adds.

Thompson also clarifies that Fiera "will essentially ultimately unify the branding" of Larch Lane under the Fiera brand.

Larch Lane's flagship hedge fund of funds debuted in 1993, and Jurish launched the company in 1999. OMAM (then Old Mutual Asset Management) bought a majority stake in 2005, and Larch Lane's management bought back OMAM's stake in 2012.

The Fiera-Larch Lane deal comes after Fiera Capital closed on its fourth U.S. acquisition, growth equity manager Apex Capital Management, at the end of May.

The Fiera-Larch Lane deal also comes after Rothschild unveiled two strategic partnerships: one with Pacific Funds at the beginning of the year, for Rotschild to power mutual funds; and the second with AAM in March, for Rotschild to power ETFs (and SMAs and UITs). 

Correction: Fiera Capital's AUM in the U.S. has been updated to reflect the recent close of its acquisition of Apex.

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