It was around Christmas 2009 when Adam Derges decided he wanted to make a career in the exempt market space. Derges had been working as a senior account manager at a large international land syndication company for three years but felt it was time for a change.
Although Derges had a clear picture of the space in which he wanted to operate, he was struggling to find an exempt market firm that aligned with his values and investment philosophy.
When a friend suggested he start his own firm, Derges wasn’t convinced, but the idea triggered an unexpected chain of events. Fast forward to September 2010 and, after months of work, Derges had ultimately taken his friend’s advice and opened a private capital market dealership called Raintree Financial Solutions with two business partners, including current president and CEO Nick Fournier.
“Thankfully, I did not know how hard it would be otherwise I never would have done this,” Derges says. “It’s a tough job starting a dealership, but thankfully we were able to convince some great people to come onboard and turn this idea into a reality.”
Derges’ interest in investing began when he was studying for an Economics Degree at the University of Saskatchewan. While studying, Derges lived in Saskatoon with an uncle who worked in the financial industry. “I was able to learn a lot from him about the space, and when I finished university I worked in the commercial real estate space,” Derges says. “I discovered that my passion was on the investing side rather than the leasing side; that was the start of my education on how effective alternative investments can be.”
Starting Raintree has been an exciting yet challenging pursuit for Derges and his team. Regulations stipulating that all individuals and entities dealing in exempt market securities be registered came into effect in September 2010, just as Raintree was starting its operations. The industry was turned on its head and, as a result, Derges did not have a proven business model to follow in the space.
“Typically, when you start a company, there is some sort of precedent to emulate and tweak, but with us, there was no precedent; we were the first of our kind to be registered in Canada,” Derges says. “We had to figure out a lot things on our own. The regulations in the early days were very vague but thankfully we were able to navigate through it. We assembled a team who were able take our vision and make it a reality.”
Derges describes Raintree’s philosophy as being “core and explore”. The core aspect encompasses the traditional components of a portfolio, and usually includes more conservative, liquid and market-oriented securities. The explore aspect composes alternative, private investments, which tend to be riskier.
If there are three rules in the real estate space (location, location, location), there are also three rules in the private investment space, Derges says: management, management, management. “When we look at every deal that worked out well, it was because of the management team of the company, and the same goes for deals that fell short,” Derges says. “The economy in Alberta has been pretty challenging of late and, in good times, management is important. But in tough times, it become hyper important.”