The Canadian asset management landscape is evolving, with a growing focus on product-driven strategies. Recent acquisitions, including those involving CI Financial and Guardian Capital Group, highlight this trend.

Shifting Market Dynamics

The rise of Exchange Traded Funds (ETFs), Bitcoin, and other alternative assets prompts a key question: do traditional asset managers still offer strong investment opportunities? This analysis investigates the valuations of ten leading Canadian asset management companies to address this concern.

Methodology & Company Selection

The study began by identifying the ten largest asset management companies listed on the Toronto Stock Exchange (TSX) using StockCalc’s stock screener. StockCalc’s valuation tools were then used to calculate each stock’s fundamental, or intrinsic, valuation.

Valuation Techniques Employed

  • Discounted Cash Flow (DCF) Analysis: Projects future cash flows and discounts them to present value.
  • Price Comparables (Price Comps): Evaluates value based on ratios from similar companies.
  • Adjusted Book Value (ABV): Calculates book value per share multiplied by its historical price-to-book ratio.

    • Analyst consensus target prices were also considered where available.

    StockCalc: A Valuation Platform

    StockCalc is a comprehensive platform providing fundamental valuation tools for over 8,000 publicly listed companies across major North American exchanges. It offers lists of undervalued and overvalued stocks and assesses the intrinsic worth of investments.

    Diversity Within the Sector

    The companies analyzed represent a diverse range of structures, including asset managers, closed-ended equity funds, private-equity firms, and investment-management companies. Despite these differences, they all share a core activity: managing capital for a fee or performance-based return.

    Revenue Model Variations

    Revenue models vary, with asset managers relying on fees based on Assets Under Management (AUM), hedge funds utilizing fees and performance bonuses, and private equity employing carried interest. Public-investment firms generate investment returns, while mutual funds base returns on Net Asset Value (NAV) performance.

    Valuation Approaches & Key Findings

    Valuation methods for these firms are similar to those used for banks, insurance companies, and Real Estate Investment Trusts (REITs), with a focus on balance-sheet methods like Adjusted Book Value. The analysis found that StockCalc’s valuations often align closely with Adjusted Book Values.

    Company Spotlights

    Fiera Capital Corporation (FSZ-T)

    Fiera Capital Corporation serves institutional investors, mutual funds, and private clients, managing separate portfolios and launching mutual funds. StockCalc’s models suggest potential upside for FSZ-T, despite recent stock price declines.

    Cymbria Corporation

    Cymbria Corporation, a closed-ended equity fund managed by EdgePoint Investment Group Inc., invests in public equity markets globally. The models indicate Cymbria is currently fairly valued.

    Beleave Inc.

    Beleave Inc. is a public-investment firm specializing in venture capital, focusing on pre-IPO companies. There is a significant divergence between StockCalc’s models and analyst targets for Beleave, with the weighted value defaulting to the analyst target.

    The accompanying table illustrates the percentage difference between each stock’s recent closing price and its intrinsic value, with the StockCalc Valuation column representing a weighted calculation. Brian Donovan, CBV, is the President of StockCalc. Investing involves inherent risks, and StockCalc disclaims any liability for losses or damages resulting from this analysis.