Leaders at Fiera Comox share how the firm's new strategy benefits from portfolio managers' experience and a flexible mandate
As a general rule in business, it’s better to be the first mover when it comes to launching a particular product or strategy. But sometimes, depending on external market conditions and a firm’s internal strengths, a newer entrant can establish themselves not just as a challenger, but as a legitimate competitor.
“We launched the Fiera Comox Private Credit Strategy earlier this year, and we made our first investment in April, so we don't have any legacy pre-COVID investment,” said Mathieu Desforges, partner at Fiera Comox, who heads the new strategy. “We can dedicate and focus 100 per cent of our time in sourcing and execution of new transactions; we're not being distracted by pre-COVID investments like a lot of other existing funds are currently doing.”
The fund may be new, but Desforges, along with his contemporary Maxime Dorais, are no strangers to private-credit investing. From 2013 to 2019, the two worked together at CPDQ, growing a junior and opportunistic credit strategy into a private-credit portfolio surpassing $3 billion. Based on that record of success, they received an offer to join the Fiera Comox team, which they did last October.
“We launched Fiera Comox in 2016 with both private equity and agriculture investment mandates, and all the strategies we’ve launched since then have been global in nature,” said Fiera Comox founder and CEO Antoine Bisson-McLernon. “We were looking at a lot of private-credit strategies to complement our offerings, and we needed a team with significant experience investing through different market cycles. Mathieu and Maxime had that exact profile.”
The Fiera Comox Private Credit Strategy also complements a shelf of eight other private-credit strategies on the shelf of Fiera Capital, to which Fiera Comox is affiliated. While those other private-credit offerings invest in Asia and Canada, Fiera Comox is focusing on opportunities in the U.S. and Europe.
“We really view the U.S. and Europe as having the most depth in middle-market lending, which is where we see lots of opportunities in the various cycles but particularly in this one where we are today,” Bisson-McLernon said.
The U.S. and European mid-market space may have depth of opportunity, but it’s no blue ocean; other managers are also there to potentially compete for promising targets. But given the financial markets’ 12-year stretch without a major crisis, Desforges believes that many private-credit investors today don’t have the kind of wisdom that can only come from witnessing catastrophic failure.
“In 2005, I was managing private-credit investments on the balance sheet of Lehman Brothers in Europe at their London office,” he said. “I continued that role through the global financial crisis of 2008, and I stayed after the crisis to help the administrator of Lehman Brothers in Europe manage and maximize the recoveries from the private-credit investments that had been made up to its bankruptcy.”
From that experience, Desforges learned just how crucial capital preservation and downside protection is to private-credit investments. He also learned that when it comes to choosing where to invest in the capital structure from a credit standpoint, it’s crucial to pay attention to the specifics of industry sectors and company, which will often make the difference in the overall performance of the investments.
“I’ve dealt with a number of large credit funds based in New York, Chicago, or London that are operating globally and deploying billions of dollars in capital,” he said. “Unlike those strategies, the Fiera Comox Private Strategy has been designed from day one to be a flexible strategy across sectors, geographies, and also partners. It doesn’t try to target a specific segment of the cycle, but aims to be opportunistic and cherry-pick the best investments depending on where we are in the cycle.”
Aside from being run by a team that’s used to deploying billions of dollars a year, the strategy benefits from a global network built over a span of 15 years, allowing it to be very selective in making investments. Its open-ended structure, he added, provides good opportunities for diversification and flexibility for investors, which many would appreciate in today’s environment.
“The strategy is open to all investors, but really the focus is on institutional investors,” he said, noting how institutions have deployed more capital toward private credit over the past years to meet their long-term return objectives. It aims for individual investment gross returns in the 10 to 14 per cent range, with a 10% net return target to investors at the fund level.
“I think what would be very appealing as well to investors is that we target 70 to 80 per cent of those returns as cash yields, which has been the case in the first two investments we’ve completed in Europe and in the U.S.,” Bisson-McLernon said. “We're absolutely thrilled to be launching this strategy.”