Post by
hawk35 on Aug 28, 2021 3:10pm
Why the share price is facing downward pressure.
TD Waterhouse reduced their 2022 estimates for EBITDA and earnings per share (EPS) because of the change in relationship with Global Equity Manager Naim Rizk. This probably explains the negative pressure on the share price since earnings were released. Below are the comments from TDW.
Event
Establishing Sub-Advisory Relationship with Global Equity Manager Nadim Rizk
Impact: MIXED
Fiera announced that it is establishing a sub-advisory partnership with StonePine Asset Management (as of 2022) to manage Fiera's global equity mandates ($60bln in AUM). This new firm is being founded by Nadim Rizk, the current Head of Fiera's Global Equity Team. We view this announcement as mixed. On the one hand this partnership arguably adds some security for Fiera in that it is maintaining its relationship with the top performing Nadim Rizk team. Somewhat offsetting, in our view, is that while the economics going forward will be neutral, Fiera's key metrics of adjusted EBITDA and adjusted EPS will be lower.
Nadim Rizk and his team manage ~$60bln in global equity AUM (33% of Fiera's $179.5bln in total AUM). We suspect this AUM represents >33% of Fiera's earnings (global equities are typically higher fee/margin mandates). Fiera's global/U.S. equity funds have a strong performance track record, with top quartile performance over 3Y/5Y periods and above benchmark since inception (2009/2010).
Fiera indicates the new agreement will be economically neutral, but adjusted EBITDA and adjusted EPS will be lower. Currently a portion of the global equity team's compensation is in share-based compensation. Going forward, this expense will move entirely 'above the line' to external manager fees. As such, adjusted EBITDA and adjusted EPS will be lower going forward as these key metrics for Fiera exclude share-based compensation, but include external manager fees.
We are estimating an ~100bps adjusted EBITDA margin headwind in 2022 from the new sub-advisory relationship with Nadim Rizk. For details on the new relationship, see our note here. A portion of the compensation for Nadim Rizk's team is currently in share-based compensation. Fiera excludes this expense from adjusted EBITDA and adjusted EPS. In our view, Fiera's earnings quality will arguably improve in 2022 as this legitimate expense will now move 'above the line' as an external manager fee (within SG&A).
In our view, this new contract arguably tightens up the relationship with Nadim Rizk and his team. The risk of key portfolio manager departures always exists for asset managers. We believe Fiera has reduced this risk by establishing a relationship that gives Nadim Rizk and his team their desired independence, yet still providing portfolio management continuity for an important portion of Fiera's AUM. In addition the new agreement has established clear client non-solicitation parameters.
Comment by
TheBridge on Dec 13, 2021 1:30pm
So hawk35, did I read this correctly, Nadim Rizk, Head of Fiera's Global Equity Team is going to be paid twice because of this new relationship? Once by Fiera through the Global Equity Team and once more by working StonePine Asset Management and advising Fiera. Maybe he could start another entity and get paid a third time.
Comment by
pumpbuster2011 on Jan 05, 2022 9:32am
Mr. Rizk has been running the show for some time now. Way too much power held over a multibillion fund. But he is not Lebron James - - the market has been an amateurs dream for many years now, making the mediocre seem magical. Good for him though to use to his full advantage. Speaks volumes re the Leadership team at Fiera though.