Merged firm seeks growth
it took a little longer than anticipated, but after receiving the necessary shareholder and regulatory approvals, Toron AMI International Asset Management is now fully operational. But the new firm, which resulted from the joining of two Toronto-headquartered firms, Toron Investment Management and AMI Partners, firms that operated in different areas of the investment management sector, may not be done with expansion.
Indeed, it may be interested in adding on a niche firm that would complement its existing expertise: fixed income and Canadian equity (supplied by AMI, a firm focused on the institutional sector) and international equity (which came from Toron’s high net worth clients.)
One possible area of interest could be a firm that specializes in preferred shares.
“Canadian preferred shares are an asset class between equity and fixed income,” said Arthur Heinmaa, chief executive of the new entity. “There seems to be a continuing ongoing demand for it and it’s not that wellorganized of a market. And there are not that many managers which are focused on that area,” added Heinmaa.
But Heinmaa insisted any merger candidate would have to be “philosophically aligned. The key is an alignment of values and culture. Otherwise you are doomed to fail because you are doing it not in the client’s best interests but as a growth strategy.”
Heinmaa stressed the new firm doesn’t intend to be a product creator. “you can’t come up with new products and hope that by being there the return ferry will arrive. you have to think deeply,” he said.
“We invest in strong companies and not just produce product because it happens to be hot. If you pursue that you end up with a lot of unhappy clients,” said Heinmaa, noting that while Toron-AMI has eight different pools, 95% of the assets are in segregated mandates. The merger did produce a few employee casualties, though none among the portfolio management. teams. The new firm, which will have a head office in Toronto and a regional office in Vancouver, has 38 employees. (As a result of the merger, AMI has closed its small administrative office based in Montreal.)
Since the mid-April merger announcement, Heinmaa said the firm has snared new institutional clients – even if the process of them becoming clients started before the merger discussions. The reason: institutions give themselves lots of time before deciding to switch or change managers.
The new firm has about $3.7-billion under management/administration — a tad higher than the $3.5-billion back in April. Assets contributed by new clients as well as the growth of the underlying asset base explain the increase.
But Heinmaa said potential clients have also called. “There has been a lot of interest as there is a recognition the strength of bringing together two groups with strong track records that has the infrastructure and compliance to support it. Joining two complementary businesses brings us to the right kind of size.”
The long-term goal, according to Heinmaa, is “to be one of the firms of choice for clients that decide to leave a financial institution.”
Calgary-based Cidel Financial Group is the merged firm’s controlling shareholder. That firm, which has links to South African interests, acquired a major stake in Toron four years back. (Cidel’s stake in the merged firm will be the same as it was in Toron.) One Canadian institution, the Bank of Nova Scotia, is a minority shareholder in Cidel.