Fiera Capital Corporation

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Sierra Capital's earnings call to discuss financial results for the fourth quarter and four year of 2023. Note that phone lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answers period. As a reminder, this conference call is being recorded. And if you would like to ask a question during the time, simply press star 1 on your telephone keypad. And if you would like to withdraw from the question queue, please press star N2. Thank you. I will now turn the conference over to Marie-France Gay, Senior Vice President, Treasury and Investor Relations. Please go ahead.

Thank you, Sylvie. Good morning, everyone. Bonjour à tous. Bienvenue à l'appel de conférence de FIERA Capital pour discuter des résultats financiers du quatrième trimestre et de l'année 2023. Welcome to the FIERA Capital Conference Call to discuss our financial results for the fourth quarter and full year of 2023. 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 2023 results, starting with an update on our AUM flows, followed by highlights of our public and private market platform, as well as our private wealth business. We will then review our financial performance. Our speakers today are Mr. Jean-Guy Desjardins, Chairman of the Board and Global Chief Executive Officer, Mr. Lucas Pontillo, Executive Director and Global Chief Financial Officer. Also available to answer questions following the prepared remarks will be Jean-Michel, President and Chief Investment Officer, Public Markets, John Valentini, President and Chief Executive Officer, Private Markets, and Maxime Minard, President and CFO of FIERA Canada and Global Private Wealth. With that, I will now turn over the call to Jean-Pierre.

Thank you, Marie-France. Good morning, everyone, and thank you for joining us today. After a difficult 2022 and amid the concerns that aggressive increases in interest rates would cause a recession, markets were surprisingly strong in the 2023, bolstered by the moderation in inflation, resilient economies, and strong corporate earnings. However, we experienced volatility during the year, arising from, amongst other things, a regional banking crisis, large-scale geopolitical events, and the changing expectations of the path of policy rates due to sticky inflation. The last quarter of the year ended on a strong note for both equity and bond markets as economies began to soften and central bankers signaled the end of rate hikes. In a year characterized by rallies and corrections, We are pleased with the resilience of our investment platforms to provide superior returns to our clients and the associated benefits to our business. We reported assets under management of $161.7 billion at December 31st, an increase of 4.1% or $6.4 billion versus that reported on September 30th and up 3.2 billion or 2% compared to last year. Assets under management in our private markets division remained constant at 18.5 billion in a year where the entire industry faced challenges in new fundraising. New mandates were, by and large, offset by the return on capital and income distributions to our investors. The significant rebound in financial markets in the last two months of the year drove a rise in assets under management in our public markets division, which saw an increase of $6.6 billion, or close to 5% in the quarter. This increase was almost entirely attributable to public markets excluding assets under management subadvised by Pinestone, which grew by $6.3 billion during the quarter. The increase was due to a positive market impact of $8.1 billion and was partially offset by $1.8 billion of negative organic growth, largely driven by lost mandates and rebalancing in long-duration fixed income mandates for clients in Canada and the U.S. For assets sub-advised by Pinestone, there was a slight increase in assets under management, as lost mandates of $2.6 billion were more than offset by the positive market impact of $3.6 billion. The vast majority of lost assets under management, sub-advised by Pinestone, related to a large Canadian financial intermediary client, and were transferred directly to Pinestone. The same client is also expected to redirect an additional $3.1 billion during the first half of 2024 as part of their ongoing transfer of assets to Pinestone that was initiated at the beginning of 2023. We now expect that this leakage directly to Pinestones from this Canadian financial intermediary will be coming to an end at the end of the second quarter. Looking at the full year in public markets, assets under management increased by 2.9 billion. While favorable market impact increased assets under management by 17.1 billion, this was offset by negative organic growth of 13.6 billion. Of the 13.6 billion of negative organic growth, 10.7 billion or 79% related to assets sub-advised by Pinestone. It is important to note that of this amount, only 6.3 billion related to lost clients that transferred directly to Pinestone. The balance was made up of 3 billion related to lost clients who exited the Pinestone subadvice strategies altogether, and $1.4 billion related to existing clients who simply reduced their allocations to these strategies. The favorable market impact for the year on assets under management subadvised by Pinestone was $7.3 billion, which more than offset the pure leakage of $6.3 billion seen through the year. Going forward, excluding the assets under management outflows related to a large Canadian financial intermediary, management expects the assets under management reduction from last mandate transferring directly to PINESTONE to be in the range of 2 to 3 billion this year. Following 2024, we expect the leakage going directly to Pinestone to be in the range of $0 to $2 billion. On a full year basis, the public market platform excluding Pinestone saw an increase of $7 billion in assets under management. While the division benefited from $9.8 billion in positive market performance, it also won $3.8 billion in new mandates across equity and fixed income strategies. This was partially offset by $6.6 billion of outflows, mainly in lower-fee fixed income strategies. I will now turn to our commercial and investment performance across our platforms in the fourth quarter, starting with our public markets platform. The public markets platform, excluding assets under management sub-advised by Pinestone, experienced a negative organic growth of $1.8 billion in the quarter, largely due to outflows in fixed income, mostly from financial intermediaries in Canada, as well as rebalancing from institutional clients, a portion of which was reallocated into equities. Our equities platform was essentially flat on the quarter, with minor outflows in Canadian and emerging market equities offset by inflows in U.S. equities and Atlas Global Equity, which saw 400 million in net organic growth for the year. This growth combined with market impact resulted in assets under management reaching 2 billion for the Atlas Global Equity team, an increase of 55% for the year. The strategy continues to see great momentum, with further inflows expected to crystallize in early 2024. Now turning to investment performance in public markets for the quarter. In equities, it was a strong quarter for most developed market strategies, as equity markets shot up in the last two months of the year. The majority of our strategies beat their benchmark, with the Keynesian equities small cap and Atlas global equity leading the pack, with over 4.5% and 3% of outperformance, respectively. The frontier market strategy continued to excel in the fourth quarter with an additional 200 basis points of outperformance, adding up to over 18% of value added for the year, delivering significant performance fees for 2023. Our emerging markets select strategies. which began in January 2021, also had an excellent year with over 22% of outperformance relative to its benchmark. This was also recognized by Bloomberg News and the Financial Post, citing that the fund outperformed 99% of its peers beating all but 12 of the 4,383 funds in its peer group. Fixed income markets also rallied in the final quarter of 2023 as expectations shifted towards a soft lending with cooling inflation leading to expectations of rate cuts. All of FIERA's flagship Canadian and foreign fixed income strategies generated positive relative returns. The global multi-sector income strategy continued to excel in the fourth quarter, generating over 170 basis points of odd performance and an impressive 8.77% of value added for the year. Sierra Capital has a strong track record of odd performance, with 98% of its public market strategies beating their benchmark over the five-year period. This excellence was acknowledged on numerous occasions in 2023. We were recognized as a top performer at the Global Manager Research 2023 Top Performer Awards, which pay homage to asset managers and funds available to Canadian institutional investors. In addition, five of the funds and ETFs we sub-advise for our investment partners, including three fixed income and two equity funds, won Lipper Fund Awards in 2023 in recognition of their exceptional performance over the three, five and 10 year period. Turning to our private market platform. The expectation of an economic downturn made for a more challenging capital raising environment in 2023 as many investors selected to overweight cash or to maintain liquidity in case of uncertain events. This resulted in a more muted growth for our private markets platform, which saw a total of $1.7 billion in new subscriptions during the year. Net contributions included return of capital to clients of just over $330 million And we also saw client reductions of about $700 million, mostly in the real estate core fund. We also distributed $640 million to clients, converted $900 million of capital from committed to deployed in the year, and maintained a pipeline of $1 billion available for deployment into future opportunities. with respect to investment performance for private markets. In real estate, the sector saw downward valuation pressures in 2023 from rising capitalization rates affecting returns. Notwithstanding this, underlying fundamentals demonstrated stability, particularly in the industrial and multi-residential sectors where FIERA strategies are overwhelmingly concentrated. There are encouraging signs that pressures are subsiding, which bodes well for future growth, particularly given the undersupply and high tenant demand for these segments. The FIERA Real Estate Industrial Fund continues to generate best-in-class performance with an 8.5% absolute return for the year, ranked number one in the Property Fund Index, and recently crossed the $1 billion threshold in assets under management. In infrastructure, the portfolio continues to have over 50% of assets that are in the climate infrastructure that supports a future with a changing climate and circular economy needs. 2023 was a challenging year for the fund as high interest rates, inflation, and global supply chain disruptions have affected the equity of operating businesses in which the fund is invested. Discount rates have also put pressure on valuations. The infrastructure portfolio is composed of long-term, high-quality, essential infrastructure assets with excellent upside potential, which remain resilient despite the downdraft in valuations in 2023. Our private credit strategies continued to perform well as they benefited from strong yields. Clearwater capital lending opportunities generated strong returns reaping the benefits from fees payable on several loan repayments. The infrastructure debt strategies also saw very strong performance with a one-year absolute return exceeding 14%. The outlook for the private credit strategies is optimistic as this asset class remains top of mind with investors, where many expect to increase their allocations in 2024. In private equity, the strategy generated strong performance in the quarter and achieved a one-year absolute return in excess of 15%. This is attributed to broad-based positive developments across the portfolio, including healthy earnings growth for several investments, offsetting down drafts caused from the higher interest rate environment. The team closed two transactions in the quarter and continues to have a robust pipeline. Lastly, the Global Agricultural Fund closed two deals in the quarter. Grove Juice in Australia in October and Inoliva in Portugal and Spain in November. The fund delivered additional distributions to investors in the quarter, along with solid operational performance and capital gains. And finally, the newly established sustainable Timberland is anticipating its first close by the end of the first quarter 2024. Moving on to private wealth. Private wealth assets under management were essentially flat on the year as market performance offset negative organic growth in public markets and income distribution in private markets. Although assets under management were stable, we did see an increase in base management fees for the division for the quarter and the year. This largely pertains to the previously mentioned pricing increase initiated in September related to private wealth which are increasingly accretive as the full benefits flow through. As previously highlighted, the new pricing is reflective of the value change of activity that private wealth clients are receiving, which includes advice, access to private market funds, and the uniqueness of our asset allocation capabilities through our feeder fund structures. Now with that, I will turn it over to Lucas for a review of our financial performance.