Fiera Capital Corp

TSX:FSZ

Earnings Call Transcript 2021-Q2

[Operator]

Good morning. My name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to Fiera Capital's earnings call to discuss financial results for the second quarter of 2021. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] And I would like to turn the conference over to Ms. Mariem Elsayed, Director, Investor Relations. You may now begin your conference.

[Mariem Elsayed, Director of Investor Relations & Public Affairs]

Thank you, Sylvie. [Foreign Language] Good morning, everyone. [Foreign Language] Welcome to the Fiera Capital conference call to discuss our financial results for the second quarter of 2021. 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.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 2 of the presentation.Turning to Page 3. Our speakers today are Mr. Jean-Guy Desjardins, Chairman of the Board and Chief Executive Officer; Mr. Jean-Philippe Lemay, Global President and Chief Operating Officer; and Mr. Lucas Pontillo, Executive Vice President and Global Chief Financial Officer.Turning to Slide 4. I will provide the agenda for today's call. We will begin by providing highlights of the second quarter. This will be followed by a discussion on AUM and flows and a business performance update. We will then review our financial and investment performance before concluding with a discussion on our recently announced partnership with StonePine Asset Management. Following our prepared remarks, we will take your questions.With that, I will now turn the call over to Jean-Philippe.

[Jean-Philippe Lemay]

Thank you, Mariem. Good morning, everyone, and thank you for joining us. I'm on Slide 5. Assets under management reached $179.5 billion as of June 30, a $6.6 billion or 3.8% increase compared to March 31 and a $7.2 billion increase or 4.2% over the last 12-month period. We generated basic adjusted EPS of $0.39 during the second quarter, up from $0.38 in the year ago period. Adjusted EBITDA was $52.7 million for Q2 2021, representing a $0.8 million increase compared to the same period last year. This corresponding margin is also up 31.5% in Q2 of this year compared to 31.1% of last year. Furthermore, when adjusting Q2 of last year for the sales of 2 Private Wealth businesses and the rights to manage the Fiera Investments and Fiera Emerging Markets Funds, adjusted EBITDA is up $8.3 million.I'm very pleased to share that net organic flows and new subscriptions received during the first half of the year amount to approximately 5.5% in annualized organic revenue growth. And for the last 12-month period, organic flows and subscriptions are amounting to 3.6% annualized organic revenue growth. We continue to execute on our catalysts for growth, growing our distribution capabilities in international markets through our competitive and diversified investment platform and leveraging our global equity and private market capabilities. As for investment performance in our public markets platform, our long-term relative performance remains very strong. On a 3-year basis, 96% of our equity assets under management and 97% of our fixed income assets under management have outperformed their respective benchmarks.In private markets, we saw strong positive performance across all our key strategies. We are also seeing positive fundraising momentum across the platform, most notably for our real asset strategies. Complementing our dedication to investment excellence and our focus on growth as we continue to pursue our objective of building a top-tier global asset management firm, our organic initiatives that will help us continue shaping our business for the best benefit of our clients.To that effect, during the second quarter, we onboarded investment and distribution professionals globally to continue perfecting our client interaction model. To date, the third quarter has been very active on this front as well. We expanded our agreement with the Canadian Institute of Actuaries to provide discount rate curves under the new IFRS 17 standard for use by actuaries to value insurance liability contracts. This builds on the company's existing 10-year partnership with the CIA and which provides the equivalent discount curve for pension plan accounting liability evaluations. These rates are publicly available to all directly on Fiera Capital's website and further establishes Fiera as a thought leader and expert in both the pension and insurance LDI space.Fiera's commitment to ESG and responsible investing is far from new. Since the company was founded in 2003, acting and investing responsibly has been one of our guiding principles. As stewards of capital, we manage assets on behalf of our clients who entrust us with great responsibility. Through this important role, we efficiently allocate capital in order to generate long-term positive outcomes that extend well beyond enhancing risk-adjusted returns.As efficient capital allocators advocating for sound governance and ethical business practices from the companies we invest in around the world, we can and must contribute to creating a more sustainable future. It's in that spirit that I'm very pleased to share that last week, we issued our 2020 Responsible Investing Report.We also joined the Net Zero Asset Managers initiative, committing to working proactively towards the goal of reaching net 0 greenhouse gas emissions by 2050 or sooner and to support broader efforts to limit global warming to 1.5 degree Celsius. We will be setting an initial target for a portion of our AUM to be managed in line with achieving net 0 emissions. We will then be reviewing this target every 5 years, at least with a view of adding more investment strategies until all other firm's AUM are included by 2050.Finally, yesterday, we announced that Fiera Capital established a sub-advisory partnership with StonePine Asset Management, a new firm to be led and controlled by Nadim Rizk, presently the Head of Fiera Capital's Montreal-based Global Equity team. This mutually beneficial agreement is the outcome of thorough strategic planning and risk management by Fiera Capital and was designed to preserve the value proposition for our clients and shareholders.Supported by Fiera Capital's institutional quality infrastructure, Nadim's global equity franchise has delivered industry-leading returns since inception in 2009. And together with his team, we've grown AUM organically from $300 million in 2009 to approximately $60 billion as of June 30 this year. This new partnership provides for the continuation of this relationship by enabling Fiera Capital clients to continue to benefit from the team's absolute dedication to investment excellence. I will discuss this agreement in more details later on the call.I will now cover AUM on Slide 6. AUM of $179.5 billion as of June 30 increased by $7.2 billion or 4.2% compared to June 30 of last year. FX-adjusted market appreciation contributed $20.1 billion over the 12-month period and generated net sales of $2.2 billion during the period. We also began recording AUM for Atlas, the new global equity team we acquired this year, which contributed $0.9 billion as of June 30. These increases were partly offset by the impact of the strategic dispositions of certain operations over the past 12 months. The results of the last 12 months speak to the post-pandemic value created by our investment teams. Collectively, they outperformed their benchmarks, adding value for both clients and shareholders.Turning to Slide 7 for a review of net flows by distribution channel during the second quarter. In Institutional, following 3 consecutive quarters of net organic sales, we had negative net flows of $300 million in Q2. We won new mandates of $1.3 billion during the quarter, marking our third consecutive quarter with over $1 billion in new mandates in this channel. Mandate 1 spans the range of our asset classes with significant wins in infrastructure and fixed income. These wins were offset by lost mandates and redemptions from existing clients, which totaled $1.6 billion during the quarter.There are a few dynamics at play here. First, as a result of Fiera Capital's expertise in the LDI space, one of our clients redeemed a portion of $300 million of their mandate with us after their fund achieved solvency. This long-standing client had turned to Fiera in 2017 for a bespoke pension LDI mandate using the full spectrum of our public and private investment platforms. This is a concrete example of what we define as a successful investment outcome and the essence of the client interaction model at Fiera, tailoring solutions that meet our clients' specific objectives and simultaneously creating value.Other redemptions in the institutional space fall broadly within 2 categories: The first consists of fixed income assets being redeemed to meet liquidity requirements; the second is a function of portfolio rebalancing, namely clients reducing their exposure to equities in order to comply with their asset allocation constraints, following a run-up in global equity markets.In Financial Intermediaries, we won new mandates across all asset classes, totaling $400 million during the quarter. Existing clients invested an additional $200 million. These were offset by $2 billion in lost mandates, where $1 billion were in part from scheduled withdrawals from short-term liquidity accounts that came earlier this year.In Private Wealth, we generated net sales of $200 million in the quarter. We won new multi-asset mandates, leveraging the full spectrum of our investment platform, including allocations to private market strategies. Of note, the $200 million in net flows in this distribution channel amounts to an equivalent 9.5% of annualized organic growth only this quarter. When we factor in the impact of net new subscriptions of $0.5 billion in our private markets business during the second quarter, total net organic growth was negative $1.1 billion. However, the AUM number alone doesn't tell the whole story. With Q2 net subscriptions expected to contribute $5.5 million annually in base management fees, total AUM flows from the second quarter can be expected to add $2.8 million in annualized revenues, which translates into annual organic revenue growth of 2.1%.I will explain on Slide 8. Our private market investment strategies generate multiple revenue streams; base management fees, performance fees, and in some cases, transaction and commitment fees. In order for our shareholders to fully appreciate our progress on the organic growth front, we've computed the annual organic revenue impact for the period shown on Slide 8 by combining the annualized revenue impact from new and lost mandates over a given period, net contributions from existing clients and anticipated base management fees from client subscriptions raised in private market strategies.You'll see that the relationship between net AUM flows and net revenue impact is not correlated. As I just mentioned, notwithstanding negative flows of $1.1 billion during the second quarter, we still expect to generate net positive annualized revenues of $2.8 million from these flows. In Q1 of 2021, $3.4 billion of positive subscription adjusted organic AUM growth will be expected to contribute $11.3 million of annual organic revenue growth. Looking at this from a half year perspective, $2.3 billion of net new subscription adjusted AUM is expected to generate $14.2 million in base management fees annually, which translates into an organic growth rate of 5.5%, excluding any market and value-added impact.As of June 30, 2021, the firm's private markets committed undeployed capital is expected to generate approximately $14 million in base management fees when looked at it in isolation. These figures exclude any transaction, commitment or performance fees, the business is likely to realize from committed undeployed capital. Accordingly, committed capital at June 30 is anticipated to generate onetime transaction fees of approximately $8 million in addition to the $14 million in base management fee. Of note, performance fees would be over and above this amount.We're very pleased with these results. They demonstrate the investment relevance of our public and private markets platform, our globally integrated distribution capabilities and our ability to source opportunities across geographies and channels. Our half year annualized organic revenue growth rate of 5.5% is well above the industry average, testament to the trust that our clients put in us, the breadth of our investment offering across both private and public market strategies, and the dedication to investment excellence of all our investment teams.Turning to Slide 9. I'm pleased to provide an update on our investment platform and how we've been executing on the firm's catalyst for growth outlined on our last call. Our public markets AUM reached $165.5 billion as of June 30, an increase of $6.2 billion from the end of the first quarter. We onboarded AUM from the Fiera Atlas team with dedication to investment excellence and outstanding long-term investment track record make them a great cultural fit with the firm.Over the last 3 years, the team has generated an annualized return of 21.6% and beat its benchmark by an annualized 8.9%. It comes as no surprise that we are already seeing strong momentum and indications of interest by investors and that the $900 million of AUM added during the second quarter exceeds what we had initially anticipated. This strategy remains very much in favor across the globe and we expect to leverage this opportunity with our proven international distribution track record and significant investment capacity. We're very well positioned to replicate prior achievements in this space.In private markets, AUM reached $14 billion, a $400 million increase compared to March 31. We raised $600 million in new subscriptions in Q2, primarily for our real asset strategies and deployed approximately $1 billion into new portfolio investments. We have one of the most diversified private market investment offerings in Canada and have several initiatives underway to further expand globally on this already solid platform to improve operating leverage and to proactively distribute our current offering to continue meeting client demand for this category of investment strategies.Deal activity remains strong on our infrastructure and agriculture platforms. We see a number of attractive deployment opportunities that are often exposed to less competitive pressure and allow us to leverage existing expertise. These strategies continue to see strong interest from investors looking to make increased allocation to real assets.In private debt, we continue to see multiple attractive opportunities for capital deployment across the platform. The pipeline for new transactions is strong, with a substantial amount of deals lined up to close in the coming months, allowing for the timely deployment of committed capital for our clients. We're excited about the future of our diversified private markets platform, which, by virtue of the predictability of its returns, lower correlation to equity and fixed income markets as well as real income and capital protection has demonstrated its resilience during the pandemic.In step with our ambitions of expanding our global reach to clients worldwide, we announced 2 distribution agreements with well-established local strategic partners in Japan and Australia. Going forward, we will be able to offer our flagship EagleCrest infrastructure strategy in both of these growth regions as well as offer our recently acquired Fiera Atlas global equity strategy in Australia and New Zealand, setting the stage for future growth opportunities.Our ability to expand to and in other geographies will be core to our growth story. We always seek to partner with reputable and well-known local players to match the quality of our investment offering, which is why we selected Mitsui in Japan, and Ironbark ambassador in Australia to be our exclusive distribution partners. We are developing partnerships for both our public and private markets investment strategies. And the continued announcements and rollout of our distribution capabilities are positioning us to leverage untapped opportunities in the worldwide markets.Following this line of thought, we welcome Bill Cashel as Senior Vice President, Global Head of Financial Intermediaries, who is based out of our Boston office. As a key member of the global distribution leadership team with a focus across both public and private markets, Bill will spearhead the initiation and growth of relationships in the intermediary channels. Bill has more than 20 years of experience in financial services, along with a highly successful track record. Before joining Fiera Capital, he worked for more than a decade at AQR Capital.By maintaining our focus on these key organic growth catalysts, we will deliver on our plan and ambition of becoming a leading provider of investment services.I will now turn it over to Lucas for a review of our financial performance.

[Lucas Emilio Pontillo, Executive VP & Global CFO]

Thank you, Jean-Philippe, and good morning, everyone. Moving to Slide 10. I'm pleased to report that total revenues of $167.4 million for Q2 2021, represent a slight increase of $500,000 compared to Q2 of last year. This is despite the impact of the sale of Fiera Investments in late June 2020, the sale of 2 Private Wealth operations in the U.S. and the termination of the CNR revenue sharing arrangement. It's important to note that excluding the impact of these 4 dispositions, year-over-year revenue would have increased $27.6 million or 20.1%, with normalized revenues increasing from $137 million in Q2 2020 to $164.6 million in Q2 2021.Breaking down the actual results further. Base management fees were $151.8 million for the quarter compared to $155.9 million during Q2 2020. In the Institutional channel, base management fees for the quarter increased $12.5 million, mainly as a result of more favorable asset class mix and AUM growth. As a reminder, before dispositions did not impact the institutional distribution channel.In the Financial Intermediaries channel, base management fees were $50.5 million for the quarter compared to $57.5 million in Q2 2020. Excluding the impact of the dispositions, revenue would have increased in this channel by $4.4 million compared to last year. This was as a result of higher AUM and higher margin asset classes, notably in small-cap equity strategies.Finally, base management fees for Private Wealth were $22.1 million during the quarter compared to $31.7 million in Q2 2020. Adjusting for the dispositions in the channel, we actually increased revenue by $4.6 million, mainly as a result of organic growth in our Canadian Private Wealth platform. These results highlight the success we are achieving in our core business and organic growth initiatives by channel.Moving on to performance fees. We generated $5.4 million in performance fees during the second quarter of 2021, a $3.4 million increase compared to the same period last year. The notable increase was mainly from the crystallization of fees with regards to a fund liquidation in public markets and the rollover assets from a closed-end fund to an open-end fund in private markets. We also recorded $400,000 in share of earnings and joint ventures in Q2 2021. This compared to $2.2 million last year. The decrease was mainly driven by the recognition of incremental revenue last year from a specific joint venture project realized by our Fiera U.K. Real Estate team.Other revenues of $9.8 million were $3.1 million higher compared to last year. The increase was mostly driven by the higher transaction and commitment fees in private market investment strategies in Q2 of this year as well as sub-advisory fees on strategies that we continue to manage for Bel Air and which are now being recorded in other revenues. On a last 12-month basis, total revenues grew by $6.7 million compared to the last 12-month period ended June 30, 2020. Excluding the dispositions, LTM revenues increased by $60.1 million or 10.6%.We are very pleased with our revenue results for the quarter. They speak to the strong demand for our competitive suite of investment strategies and the progress we continue to make in further developing our distribution capabilities as we continue realigning the business within the framework of the global operating model that we introduced last year.Turning to Slide 11. Selling, general and administrative expenses were $119.9 million during the second quarter of 2021, a $2.6 million decrease or 2.1% from last year, which includes $20 million of SG&A related to dispositions in Q2 of 2020. Excluding the impact of these sales, SG&A increased $17.4 million compared to a $27.6 million increase in revenue. Compared to Q1 2021, SG&A decreased $1.5 million or 1.2%, slightly favorable to an increase in total revenues of 1.1%. Excluding the impact of these dispositions, SG&A would have increased $7 million compared to a $14.5 million increase in revenue.Turning to Slide 12. Adjusted net earnings during the current quarter were $41.3 million compared to $38.7 million in year ago period, an increase of $2.6 million or 6.7%. We recorded net earnings attributable to company shareholders of $13.3 million or $0.13 per share basic and $0.12 per share on a diluted basis during the second quarter of 2021, an increase of $28 million compared to the second quarter of last year, notably due to the recording of a $20.9 million restructuring charge and acquisition-related costs in Q2 2020 in connection with the implementation of the firm's global operating model.The difference between net earnings and adjusted net earnings is explained largely by the amortization and depreciation of $16.5 million as well as $6 million of restructuring, acquisition and other related costs and $5.2 million of share-based compensation expense for the quarter. Share-based compensation expense was down $2.3 million compared to last year as a result of higher share-based compensation expense recorded in Q2 of last year, resulting from the accelerated vesting related to employee terminations in connection with the announced operating model changes. This was partially offset by lower expenses in Q2 of this year due to the timing of certain grants.Adjusted EPS was $0.39 in Q2 2021 compared to $0.38 in Q2 of last year. Diluted adjusted EPS for the quarter were $0.36 as a result of the effect of higher diluted weighted average number of shares outstanding.I'm now on Slide 13. We are generating adjusted EBITDA of $52.7 million in the current quarter compared to $51.9 million in Q2 of last year, an increase of $800,000 or 1.5%. Excluding the impact of the dispositions, adjusted EBITDA during the current period was $50.8 million, an increase of $8.3 million or 19.4% compared to Q2 of 2020. With regards to the adjusted EBITDA margin, we are very pleased with the strong 31.5% margin realized in Q2 of this year. On a last 12-months basis, we achieved a margin of 30.7% or $214.6 million of adjusted EBITDA.On Slide 14, over the last 5 quarters, we have been consistently reducing our debt while simultaneously improving our operating results, which has allowed us significantly lower our financial leverage. Net debt, which includes our convertible and hybrid instruments, is down $50.1 million or 8%, reaching $580.5 million as at June 30. Likewise, our funded debt used to compute the funded debt-to-EBITDA ratio as per our credit facility is down $64.8 million or 12.5% over the same period and now stands at $451.5 million. I am pleased to report that as at June 30, 2021, our funded debt ratio held at 2.4x, unchanged for the last quarter, and the same is true of our net debt ratio at 3.1x. This is the lowest level these ratios have been over the last 3 years, lower than they were prior to completing 6 acquisitions over the course of 2018 and 2019 and despite the setback from the pandemic in 2020.On to Slide 15. In addition to reducing our financial leverage, delivering value to shareholders through optimized capital allocation remains an ongoing priority for Fiera Capital. As such, I'm pleased to announce that we have renewed our normal course issuer bid. Under the renewed NCIB, the company may purchase for cancellation of the 4 million of its Class A shares from August 16, 2021, up until August 15 of 2022. Under the NCIB that expired last month, we purchased close to 900,000 shares for total consideration of $10.1 million, of which $7.1 million was during the first half of 2021. Including the $43.6 million we paid to shareholders during the first 6 months of the year, this brings total value paid to shareholders to $50.7 million in the first half of 2021. With regards to our cash position, we ended the quarter with $42.7 million in cash and cash equivalents, and the Board has once again approved a quarterly dividend of $0.21 per share, unchanged from the previous quarter and payable in September.I will now turn the call back to Jean-Philippe for a review of our investment performance.

[Jean-Philippe Lemay]

Thank you, Lucas. On to Slide 16. Most of our public market strategies generated alpha during the second quarter, maintaining strong 1-year and 3-year performance results. Breaking this down further, nearly all of our large-cap equity strategies outperformed their respective benchmarks during the second quarter. The Atlas team generated an impressive 5.62% of added return in Q2 and 4.7% over 1 year. On a 3- and 5-year basis, almost all our large-cap strategies generated alpha relative to their benchmarks and are all beating the median manager for their respective peer universe.Our U.S. small and mid-cap growth strategy lagged its benchmark during the second quarter by 50 bps, though on a 1-year basis the strategy continues to outperform its benchmark and has generated a return of 58.2%. The Frontier Market strategy continued its strong run of performance, generating a 19.1% return in Q2 2021 and outperforming its benchmark by 5%. The strategy boosts strong absolute and relative performance results over the 3- year and 5-year periods and ranks in the first quartile for both periods.On the fixed income side, all our Active Universe strategies generated positive value-added during the second quarter and over a 1-year horizon. Our Specialized Credit strategy ranked first quartile during the quarter, outperforming its benchmark as a result of its allocation to credit and more specifically, to securitize assets. The strategy also ranks first quartile on a 1, 2, 3, 4 and 5-year basis.Turning to Slide 17 for a review of our private market strategies. We saw strong performance across all key strategies in private markets during the second quarter. The Canadian and the U.K. real estate strategies continued to deliver strong performance in Q2 after building momentum in the back half of 2020 and Q1 of 2021, driven by their allocation to industrial and multi-residential sectors and are expected to continue to demonstrate valuation growth.On the private debt side, our strategy has generated strong returns for the quarter across the board. That is across all regions and collateral types backing the underlying loans. The infrastructure strategy has remained operationally resilient, the challenges posed by the COVID-19 pandemic given the construct of the portfolio. The strategy's internal rate of return since inception sits at 8.9%. The Global Agriculture strategy delivered another strong quarter of performance, driven by our portfolio investments in Australian row cropping assets and by our specialty tree fruit business in Central California. We're very pleased with the work of our teams and with our second quarter results, which are a testament not only to our strong investment performance, but also our enhanced operating leverage and continued focus on developing our client interaction model.Turning to Slide 18 to discuss sub-advisory partnership with StonePine Asset Management that we announced yesterday. This partnership is the result of thorough strategic planning and risk management by Fiera Capital, following the tremendous success that the team has achieved over the past 12-plus years with the support of Fiera Capital's top-tier institutional grade operating model. This partnership was designed with the objective of preserving value for both our clients and our shareholders by reinforcing the interdependence between Fiera Capital and our Montreal-based global equity team that led to such an outstanding success. We believe that this agreement is an excellent outcome for all parties involved in that it is the best -- in the best interest of all stakeholders.Under the terms of the agreement, Fiera Capital will continue to maintain direct relationships with clients as the investment management manager, while StonePine will provide sub-advisory services overseeing investment decisions with respect to the company's global EAFE and U.S. equity strategies currently managed by Nadim Rizk and his team. Fiera Capital clients presently invested in these strategies will remain clients of Fiera Capital and will continue to benefit from the firm's investment thought leadership and its asset management infrastructure, including client relationship management, compliance, global trade execution, operations, risk management, performance measurement and reporting services as well as technology support.Preserving our value proposition for our clients and shareholders is of utmost importance to Fiera Capital. And with this agreement, we are confident that this has been effectively maintained while providing for strong alignment of economic incentives. With strongly aligned incentives, this structure provides for the continuation of a relationship that has created significant value for the company's clients and shareholders for over a decade.I'm on Slide 19. This innovative structure was crafted to be mutually beneficial to both StonePine and Fiera Capital while keeping value preservation for clients and shareholders top of mind. It enables our clients to continue to have access to Nadim's successful strategies as well as Fiera Capital's global platform and suite of public and private markets investment management services. It maintains Fiera Capital's revenue and expense profile under economic terms that are similar to the existing arrangement or the strategy totaling approximately $60 billion as of June 30, while also providing a seamless transition for clients.At the same time, it also provides Nadim and his team with franchise independence. And Fiera Capital will also be providing the StonePine team with separate office space in the same building as our global headquarters in Montreal. We are pleased to have been able to develop a structure that allows Nadim to fulfill its ambition to manage an independent firm while preserving value for all stakeholders, enabling Fiera capital to maintain direct relationships with clients and StonePine to provide expert investment services.Going forward, with the global EAFE and U.S. equity strategies currently managed by Nadim and his team being capacity constrained, Fiera Capital will continue to pursue new avenues for growth and continued diversification through complementary capabilities. Looking ahead, we're focused on driving shareholder value by building on our robust platforms in asset classes and investment strategies where we see opportunities for growth, including our diversified private markets investment platform as well as our new Fiera Atlas global equity strategy. We're already seeing strong demand for this strategy as a result of the Fiera Atlas team's leading performance track record, and I'm confident that Fiera Capital remains well positioned for long-term success.This concludes our prepared remarks. I will now turn the call back to the operator.

[Operator]

[Operator Instructions] And your first question will be from Nik Priebe at CIBC.

[Nikolaus Priebe, Research Analyst]

Okay. Just had a quick follow-up related to the arrangement with Nadim. So one element of the agreement entails the accelerated vesting of some previously earned share-based awards, which should have an incremental impact on compensation expense in the second half of the year. Just wondering if you'd be able to help us kind of quantify what impact that should have what we should be expecting over the next few quarters here?

[Jean-Philippe Lemay]

Sure. I'll -- rather than giving forward guidance, I can give it to you in historical terms, and that should help you work it through. So as mentioned in the financials, as at Q2 or the end of June, the last 12-month expense related to the team was about $7 million. It's important to note that that cuts across 3 different programs. The program is best for 3 years. So as a result, given the tenure of the team, you'll always have a rolling 3-year program at this point. So that should give you an indication of, as I say, the historical expense across those 3 programs for the last 12 months. It is important to note, however, that certainly going forward as older programs would fall off and newer ones would roll on, that there would be a tendency for that number to increase. But that also would be subject to certain performance metrics.

[Nikolaus Priebe, Research Analyst]

Okay. Understood then. And then just my second question, switching gears. Just wondering if you could provide a little additional color on the outlook for net flows. And I recognize that the onboarding of new mandates going to be chunky from quarter-to-quarter. But in the context of the discussion around performance and the trailing 3-year numbers being very strong, have you -- are you experiencing a corresponding acceleration in RFP activity or anything that would make you particularly encouraged about the outlook there going forward?

[Jean-Philippe Lemay]

I can attest that currently the pipeline of short- and long-listed opportunities is strong. We are in a position right now where there's -- we see this translation, as you highlighted. And I would say that north of 2/3 of the current pipeline also is associated with our private markets capabilities. So that also translates in terms of potential future revenues in a material way. So -- and in terms of RFP activities, we've experienced a very high level of volume comparing to historical standards over the past 6 to 9 months as activity picked up as well on the new business development side. So I mean I'm refraining from giving you specific numbers here, but I can tell you that the activity right now is quite encouraging.

[Operator]

Next question will be from Gary Ho at Desjardins Capital Markets.

[Gary Ho, Analyst]

Just going back to the StonePine sub-advisory partnership. I know there are near-term clauses in place, like not a lot of AUM changes expected over the near term. But if you look out more kind of 3 to 5 years, what gives you comfort there won't be any material redemption risk specific to the strategy?

[Jean-Philippe Lemay]

The way we've structured the agreement is really to incentivize both parties to have the longest possible horizon of this partnership. We're both incentivized to make this work over the long term. We feel that with market returns, just from a market return perspective, we feel that there's even still a potential natural growth opportunity in that current book of business in either -- even if the capacity is constrained at this point, not to mention the other growth opportunities that we have in our other strategies. But we feel confident that this partnership will last for a very long period of time. And we have mechanism in place to incentivize both parties to make it work over the long term.

[Gary Ho, Analyst]

Okay. Right. My second question maybe for Lucas, just on the restructuring costs in the quarter, $6 million. It seems high just given pretty much you moved away from the M&A strategy. I didn't think that Fiera Atlas acquisition would incur large restructuring expense. What's driving that still? And how should we think about the magnitude of this looking out?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

I wouldn't suggest that there'd be anything in there that would be recurring going forward. I guess continued clean up from some of the dispositions that we had had over the last year. And you'll recall that I spoke about the last time about the fact that while we did the divestitures, there was still some overhang in terms of overheads that would need to be readjusted as part of the new operating model, post those divestitures. So that's really the cleanup you're seeing in Q2.

[Gary Ho, Analyst]

Got it. Okay. And then just last question is for Jean-Guy. Thanks for joining the call. I know you're still very active in the day-to-day. Any update in terms of succession planning discussions at the Board level that you can share? And also in relation to your significant ownership in the company. I often get asked that question from investors, so any color on that would be helpful.

[Operator]

I'm sorry, we're unable to hear you.

[Gary Ho, Analyst]

Sorry, you're talking to me?

[Operator]

No, to the presenter.

[Gary Ho, Analyst]

Okay.

[Jean-Philippe Lemay]

Maybe Jean-Guy has a connection...

[Jean-Guy Desjardins]

No, no, I'm okay. There was technical problem that I courageously solved there. My answer was I'm 3 months closer than I was 3 months ago, which is not -- it's an exact answer, but I'm sure it's not the one you're looking for. So we're into -- right now, I'll say, I am 18 months into a plan that I have agreed to with my HR committee, which is chaired by Jean Monty and we have a specific date in mind, but if my HR committee and myself believe that it would be premature right now to announce the specific date of that transition and the transition is one where I'm not obviously retired -- retiring. But when we get there, the plan calls for me to continue to act in a different number of functions. Well, first, obviously, as Executive Chairman where I will be at that point passing on my CEO responsibilities. And you've seen that in the past, when somebody is promoted to be President and Chief Operating Officer, normally it's because he's the top candidate to eventually potentially take over the CEO position. So there is no difference in our pattern than the one that you'll see elsewhere, the most recent being National Bank with Louis, okay?So when we get there, we will announce it and we're getting closer and closer to that point, but individually or personally, I will continue to assume primarily the investment management responsibilities that I've always maintained throughout my career, which is my responsibility as the tactical asset allocator in the firm for our solutions client and our multi-asset clients, which we do obviously, and I've always done that quite successfully.And on the high net worth side, I always maintain a meaningful number of high net worth clients that I have continued to look after over time, which I will maintain. And preparing for that movement in my personal responsibilities, I just took over a nice opportunity to talk about it. I just took over the management of 3 diversified real asset portfolios within the private market group. So we're a team of 3 people, I now lead the portfolio management responsibility of a diversified lending fund for Fiera Capital, a diversified real asset fund and a diversified real asset -- real estate fund. So I just took over the responsibility a few months ago of overseeing leading the management of those strategies and promoting them and growing them within the private markets group. So that's the update.

[Gary Ho, Analyst]

And Jean-Guy, still envision holding your significant ownership in the company after this change? Any early read there?

[Jean-Guy Desjardins]

Absolutely. Absolutely.

[Operator]

Next question will be from Geoff Kwan at RBC.

[Geoffrey Kwan, Analyst]

My first question was just going back to Slide 8 on the deployments of the committed but undeployed capital. I recognize it's going to be lumpy in terms of when it actually gets deployed. But just wondering if there's a sense you can give in ballpark timing of when of realizing that kind of $14 million of management fees from that committed but undeployed capital?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

It ranges by platform. So we've got a mix in there anywhere from 6 months, call it, 5 quarters. So you'd average about a year, less than a year is what we're looking at in terms of the pipeline.

[Geoffrey Kwan, Analyst]

Okay. Great. And just my other question was, I mean, the longer-term fund performance continues to be quite good. But the shorter-term performance seemed to slip a little bit this year. Just wondering if there's anything that you would point to that kind of attribute to the performance on the shorter term?

[Jean-Philippe Lemay]

If there is anything, Geoff, on that front, on the public market side is mostly related to the inflationary environment that we are seeing in the market, and that has some impact, let's say, for instance, on our Canadian equity strategies, which is very little exposed to the energy sector, for instance. So I think it's mostly from a -- because of the macro context, not because of any dilution or deterioration in the quality of the investment process at this point.

[Operator]

Next question will be from Graham Ryding at TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

SG&A comments, Lucas, I think you mentioned performance fees, just some color there on what drove the performance fees in the quarter?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

Yes. So there was, as I mentioned, we had a $2.6 million of crystallization during the quarter in 2 funds, which will not be recurring. One was actually a closure of a fund in the public market side and the other was actually just a transition of assets from an open-ended fund -- from a closed-end fund to an open-ended fund, which caused us to crystallize in the quarter. So you can consider about $2.6 million as sort of exceptional for the quarter, if you will.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Understood. Your update last night regarding the StonePine sub-advisory relationship, it was pretty detailed. So I do appreciate the good disclosure on that front. Just broadly speaking, how do you feel you've sort of set up the agreement so that you've protected yourself going forward from the potential situation of this new asset management firm, taking some of your client relationships and potentially bypassing Fiera in the process? How have you protected yourself on that front?

[Jean-Philippe Lemay]

Well, maybe I can give some color on that. This agreement has been very well crafted, jointly crafted as well and structured with Nadim over the past few months. We're both in this with a long term mindset. And maybe, Jean-Guy can give some further comments around the relationship that we have -- we've been developing over the past 12 years. But if I go to the crux of the agreement, the way that the termination provisions are structured, there's a very strong protection, especially if ever, in the future, StonePine would want to terminate that agreement. So as I explained, there's a 12-month notice period that needs to be shared and to be provided by StonePine. But the even more protective measure of the agreement is following that first 12 months, there will be a 12-month period where StonePine could not contract with the clients that are currently under the sub-advisory structure agreement. And that's on top of non-solicitation clauses as well that are being provided by StonePine as well upon closing. So we feel that well, on the one hand, the relationship, and maybe Jean-Guy can comment on that, but from a legal standpoint as well, right, we feel we're well protected as well.

[Jean-Guy Desjardins]

Well, if I may add a little bit to that to help you understand where this agreement comes from. We've been -- we associated with Nadim 12 years ago and we started him off with $300 million. And along the way, I personally developed a very strong personal relationship with him. Nadim, many, many times along the way, looked at me and told me I was his second dad. And he happens to be very, very close to his family. His dad and mother live in Beirut and his background to all that. And on occasions, especially one occasion, I was invited by Nadim and is wife to join his mother and father at dinner at his place in Montreal, where his parents were visiting. And his mom cooked traditional Lebanese dinner, which I would wish everybody had the experience to have at least once in their life. And long, long conversations and personal connection, which I had with Nadim, but I also had with his father. And the background to what's happening today is important to understand why this is happening, because along the way, every time we had -- I had, it's always me who had discussions with Nadim for his business, about the financial sharing of the book of business, which came on the table every 18 months, 24 months, as the business was growing, which as we all know, which we negotiated along the way, and we are -- where we are there on the economics of it. But all along, he kept telling me that he was haunted by his desire to prove to himself that he could be in business of his own.And I -- going back to the -- it's summer of 2020. Within Fiera, we knew and I think that our outside shareholders knew that as well, that we had there a big franchise, $60 billion of assets under management. And that unknown -- everybody knew that Nadim had this deep desire of -- before retiring, proving to himself that he would have a business of his own. But that was a risk factor important -- it was an important risk factor for Fiera. And internally, between ourselves, JP, Gabriel, Lucas and myself, we were -- and John Valentini, who's a member of members of my Executive Committee, we were constantly, constantly worried, preoccupied, thinking about what if Nadim decides to leave and in the process destroy part of the economic value of that franchise, obviously. But could you do it? And obviously, I have a view on it. Other people had another view on it. But we were constantly living with that uncertainty, which was a significant risk factor for the organization. And we decided last summer that we would deal with it.And dealing with it implied obviously approaching Nadim. And I approached him, and I said, there's one -- if somebody understands you and your desire to be on business on your own, it's me. I share that 300% because I've done that 3 times in my life. I've created 3 businesses. So I respect that. So why don't we try to work together to put -- to create a situation where you will satisfy this need of yours that I understand, 100%, okay? So that you can be super happy in your new life as an entrepreneur, running your business, but as long as, at the same time, you accept to respect the economics underlying what we've built together, which is your share and our share. And that you respect the concept of a long-term partnership and the long-term relationship that we would maintain but that gives you, at the same time, the opportunity to grow your business outside those 3 investment strategies that we've built together.So if you want to create a global small-cap strategy, and you can put together a 3, 4, 5-year track record, and you are very successful in building a global small-cap strategy, great. Fantastic. In fact, I'll be more than happy to help you succeed in developing and be a very successful guy in building new strategies and in fact, we'll support you, okay? That's -- why not, right? We're interested in seeing you have the greatest possible success. But fundamentally, as long as you respect the principle that what we've built together, we co-own that, which we share, and it's important to respect the fundamental economics that we have in the adventure between you and us today, okay, and that was the fundamental principle.And from then on, it took us basically 18 months to put together the agreement that we have today. And I think, well, Nadim is very happy about it, and we're very happy about it because we've achieved what we were aiming to achieve. One, we derisked -- we have derisked for Fiera and Fiera shareholders the risk that Nadim and his team will decide to move on their own. Obviously, that drives some of the fundamental value of that franchise, but be willing to pay that price in order to be on their own independently, okay? And that was a big risk for the firm, and we've -- now it's gone. That risk is gone.So now it's a question of making sure that the operating of that new relationship is seamless that it's smooth and continues to be in a friendly environment with the relationship that we've had with Nadim in the past and that hopefully, we will try -- obviously, try to carry on in the future. I called Nadim. We had a Board meeting yesterday, we approved it. First thing I did is I called up Nadim, and I told him, Nadim, congratulations. I'm happy for you. I'm happy for Fiera. The Board approved it and we're moving on to the next step in your life and our lives, and let's make a big success again, okay? That was the attitude and that's the relationship we have. So that's all -- I mean sorry, it's long, I think, lots of stuff here but I think it's important for your people to understand where it's coming from.

[Operator]

Next question will be from Scott Chan at Canaccord.

[Scott Chan]

So on the sub-advisory partnership, is there a certain duration to this agreement? And could there be amendments to the current clauses that you kind of put forth today or yesterday?

[Jean-Philippe Lemay]

So the first part is that we've purposely structured the agreement with indefinite term -- indefinite duration in the spirit of wanting this to be as long as possible. But at the same time, the termination optionality that I've discussed already earlier in the call and the agreement has been so well thought through with over many months, as Jean-Guy highlighted it, that we have not included any mechanisms for amendments or changes in the agreement at this point.

[Scott Chan]

And when we talk about like the Fiera, the economics stay similar for revenue and expenses, but the expenses will be different in terms of the sub-advisory versus the share-based compensation. Can you quantify in 2022, what you see that impact being to adjusted EBITDA and adjusted net income?

[Jean-Philippe Lemay]

No. So I won't quantify in terms of forward-looking because, again, it depends on different factors, but I can give you on a historical LTM and that should help you kind of work the numbers. So to be clear, the current compensation arrangement is a base compensation arrangement plus a share-based compensation arrangement. By virtue of our non-IFRS measures, you'll know that share-based compensation is excluded from our calculation of adjusted EBITDA and adjusted net earnings. Therefore, on a go-forward basis, when we now roll this into a sub-advisory expense, so the 2 components now become one in a total sub-advisory expense to the same order of magnitude and quantum in terms of economics. However, the accounting changes, if you will, with regards to that above-the-line shift for that share-based compensation portion.On the last 12-month basis, the expense for the team has run at about $7 million. And we need to keep in mind that there's a -- these are 3 year vesting programs. And given the tenure of the team, there's always an effectively 3 outstanding cycles that are rolling at the same time. So that should give you an idea about how to think about that going forward. And as I say, obviously, the older vintages have a lower weighting -- have a lower amount on them than the higher amounts. So that $7 million represents about an average of where that program is running right now.

[Scott Chan]

Okay. And on the Atlas, the new strategies that are at $0.9 billion in the quarter, I noticed when you announced it, it was $0.5 billion, and you kind of talked about the massive opportunity to increase capacity and relative fund performance in Q2 was robust, and I see that medium-term as well. What's the strategy there I guess initially and how do we think about that going forward? Is it catered more to Institutional right now? And then is there a plan to offer this kind of on the retail side at some point as well?

[Jean-Philippe Lemay]

The strategy -- the distribution strategy for the global equity Atlas team is relevant across our channels. The institutional quality investment process that they are bringing to the firm is obviously very much -- cater very much to Institutional and we've demonstrated a great track record in terms of raising assets in the space in Canada and the U.S. and even internationally. Financial Intermediary, it's our way to access retail and there's a ton of opportunities, both north and south of the frontier. And you mentioned the $400 million delta from what we purchased and now what it's sitting at actually comes -- and most of it comes from financial intermediary relationships in the U.K.And obviously, as we continue to grow, we've demonstrated a great organic growth quarter in Private Wealth, that's also very relevant as an addition in our multi-asset solution for our high net worth clients. So really, we see that strategy applicable. And it's one of those, right? It's not all of our strategies that are like that, but especially in that one, they are extremely relevant for all our channels. And given the nature of the -- where the capital is deployed, it's a global equity strategy, it's also very much relevant for all our channels and given the nature of where the capital is deployed, it's a global equity strategy, it's also very much relevant for clients in all regions of the world.I can also speak in terms of addressing more foreign markets. And I spoke in my prepared remarks about the distribution agreement in Australia and New Zealand, especially geared towards intermediaries and institutional for that particular team. And again, that's one way that we are planning to accelerate growth in international markets. So that's one of those, right? It's relevant across the platform, across channels and across regions.

[Scott Chan]

Is it just a one global equity strategy that they have right now? Is there opportunity to launch like additional strategies?

[Jean-Philippe Lemay]

We're -- the team is working on launching at the beginning of Q4, end of Q3, a U.S. version of it. At this point, that's the second strategy that we're going to launch with them and that's the plan for now.

[Operator]

Next question will be from Aria Samarzadeh at Barclays.

[Aria Samarzadeh-Vajdehfar]

Just wondering if you guys can give us an update on the progress for the new global operating model in terms of how much savings were achieved this quarter? I know it's something that you guys were disclosing in the past. And are you still anticipating these savings to start hitting the bottom line this year?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

Sure. So I think as I mentioned last quarter, and the trend has been consistent, we did realize $5 million of savings in terms of run rate savings. We have been redeploying those savings into other areas, particularly in distribution. You will note that we just -- we made some announcements and particularly the Financial Intermediary channel. So again, it was one of those where we say we've achieved the savings, but we've also been cognizant to reinvest for growth going forward. And I think we've highlighted a few examples already over the first 2 quarters as to where some of those priorities have been.

[Aria Samarzadeh-Vajdehfar]

Okay. Now previously, you were saying that you do expect the timing was uncertain, but you did anticipate that these savings to start flowing through the bottom line and not be reinvested. Are you still anticipating that or do you believe that they're going to continue to be redeployed moving forward?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

I think we're in the process of looking at all of that. We see tremendous opportunity with our private alternatives and private markets asset classes at this point, from a distribution perspective. I think we've talked about the committed and undeployed capital and it's one of those areas where we think we see tremendous opportunity. We've got a great platform of well-performing products in private markets. And it's really about being able to support the distribution infrastructure to get them out there. And so the view there is that it's a dollar invested today for higher return tomorrow in terms of being able to get those out to clients in our global model. So that really is the plan at this point.

[Operator]

[Operator Instructions] Next question is from Jaeme Gloyn at National Bank.

[Jaeme Gloyn, Analyst]

Just want to get through a couple of cleanup questions. First off, on the accelerated share-based compensation related to Nadim's agreement, will that accelerated share-based comp get adjusted out of the EBITDA when that occurs?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

No. I mean, it will be transparent enough, however, going forward in terms of -- I mean, obviously, we're going to see a spike, whether it goes through in Q3 or Q4 or even into Q1 of next year. And at which point we'll obviously comment on the reason for the increase, which will have been the acceleration.

[Jaeme Gloyn, Analyst]

Okay. Got it. And then just going through some of the line items. I understood there was $2.6 million of, let's say, onetime items in performance fee income this quarter. Is there anything within the other revenues line that you would suggest as onetime?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

No. Just to be clear, on the performance fees also, I think one of them related to the fund closure itself, that would sort of be the onetime crystallization, if you will. On the private markets fund, it was about $1 million of that. That effectively now is just the fund structure itself has changed. So we would expect that to continue going forward. It was just a question of crystallization upon the actual transaction itself in terms of changing fund vehicles. In terms of any other onetime items, no, there's nothing onetime otherwise in other revenue. What is new, however, as I think I've mentioned there's about $2.7 million related to sub-advisory fees for Bel Air. So we continue to sub-advise to the Hightower group post that disposition. They were very happy with the investment strategies offered there. So we're continuing to offer that and that now is making its way through other revenue. Previously, that would have been included in our Private Wealth revenue line item and at this point, it's being picked up in other revenue. But I would not categorize it as a one timing.

[Jaeme Gloyn, Analyst]

Right. And is that indicative of a typical quarter or for example, the $2.7 million, we would expect that to repeat and potentially grow off of the space in future quarters?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

Correct. Correct.

[Jaeme Gloyn, Analyst]

Yes. And then same type of question for SG&A. Are you able to quantify the benefits from let's say reduced expenses a result of COVID operating environment and then anything else onetime in the SG&A number?

[Lucas Emilio Pontillo, Executive VP & Global CFO]

Yes, I wouldn't say anything really onetime here. It's just more -- travel and marketing continues to be an area where we're not spending at the level that we would like just because of the travel restrictions. So that area remains lower than normal, if you will, and we've probably benefited from a, call it, anywhere from $500,000 to $750,000 benefit for the quarter relative to that compared to historical levels and that's really the only area where we're still not spending sort of pre-COVID levels, if you will.

[Operator]

There are no further questions at this time. Ms. Elsayed, I turn the call back over to you.

[Mariem Elsayed, Director of Investor Relations & Public Affairs]

Thank you, operator. That concludes today's call. Thank you, everyone, for joining us.

[Operator]

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.