A wealthy family office in Montreal wants to put money into new managers for some reason.
Do your days seem a little bit darker when you don’t watch OPM Wire? I could have sold this post to Advisor’s Edge because it’s so boring. For a change, I don’t want to talk about the problems with different funds. Instead, I want to tell you about a source of capital that wants to back money managers.
Sylvain Brosseau is in charge of Walter Global Asset Management (WGAM). He used to be the second-in-charge at Fiera Capital. Fiera Capital is a money management consolidator with about $170 billion in AUM, if I have to explain everything. Jean-Guy Desjardins started Fiera from scratch in 2003. He had built and sold TAL Global to CIBC before that.
People in Montreal think of Fiera as the big boss, but his stock price is the same as it was 10 years ago, even though he has bought companies all over the world since then. In 2017, Sylvain left Fiera and went on to start WGAM. He has a lot of power in the financial world of Quebec, and he is also on the board of the Caisse. I’ll keep my fingers crossed that I’ll be smart enough not to insult him.
The Somers family, who made their money with Walter Surface Technologies, backs WGAM (WST). WST specializes in power tools and abrasives. You may have seen the Walter brand at the hardware store. In 2018, Walter was sold to ONCAP, which is Onex’s middle-market arm. The family has been putting their money into different types of assets.
WGAM is one of their private equity investments, which is worth about $240 million. WGAM has $100 million of its own money to buy minority stakes in smaller asset managers. The Somers put $40 million into WGAM and are also willing to put money into the funds of the managers with whom WGAM works. The other $100 million comes from other “savvy investors” (as that term is commonly understood).
In 2019, WGAM’s first deal was to back LionGuard Capital, which is also based in Montreal and is run by Andrey Omelchak. Andrey has a great story. He is from the city of Perm in the Ural Mountains in Western Russia. He is tall and very handsome, with hair and facial bones that anyone would want.
He went to Montreal to study, then worked as a financial services analyst for Montrusco Bolton. In 2014, while he was still in his 30s, he started LionGuard. In Montreal, it’s not easy to start a startup fund, so it’s really to his credit that LionGuard has been able to stay alive and grow.
I’ve been especially impressed by how well he can make connections with people. As a buy-side analyst, he was already able to meet with bank CEOs one-on-one. And getting Sylvain Brosseau as a director is almost as impressive as Arnold Schwarzenegger moving to America and marrying a Kennedy.
What does Andrey keep hidden? When I watch him on BNN, his calm, measured way of speaking makes him seem more trustworthy, especially if you can stay awake through it.
Now, some people say that his wealthy parents helped him, but boo-hoo, a lot of people have wealthy parents, and they don’t all build a solid OPM firm. I quickly looked at the returns of his three funds, which have only been around for a few years. But even if we put that aside, I don’t see any reason to think that LionGuard adds any real value. If your first thought was, “How is that a problem?” then you know exactly how the OPM business works.
I’m always looking for signs of bad thinking, and I found one when I saw that LionGuard manages a “conservative” mandate. I’ve never been able to figure out what a “conservative” strategy is. I think that the job of a fund manager and the job of a cab driver are the same: you drive as fast as is safe. I think it goes without saying that staying alive is a big part of the job. So far, this is how the conservative mandate has worked. I’ll let you figure out what WGAM thought of this:
Also, I don’t understand why a small company already has three plans. One strategy is both the honest and the most effective way to do it. Yes, Andrey shorts and gets paid for his performances. Get with the times.
So far, LionGuard is only one of three deals that WGAM has made. If I understand it right, they already want to raise another $400 million so that they can back 15 to 25 asset managers around the world. Sylvain has said, “There is no exit strategy here, no time frame for getting out of the business. My goal is to build something that will last long after I’m gone.”
Buying shares in money managers is likely one of the smartest and safest things you can do, as long as you do it right. Now, there are private equity firms that do nothing but buy shares in other private equity firms.
If you do it right, you are buying a piece of the world with the money of other people. But you have to be smart to pick the right jockey to bet on. Is it with Sylvain and WGAM? Thanks for your question. I’ve thought about it and talked to other people, and I’ve decided that I can’t answer it.
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