Fiera Capital Corporation (FSZ) Earnings Call Transcript & Summary

Good morning. My name is Julie Anne, 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 fourth quarter and 2020 fiscal year. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] I'll now turn the call over to Ms. Mariem Elsayed, Director of Investor Relations and Public Affairs. Ms. Elsayed, you may begin your conference.

Thank you, Juli Anne. [Foreign Language] Good morning. [Foreign Language] Welcome to the Fiera Capital conference call to discuss our financial results for the fourth quarter and 2020 fiscal year. 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 fiera.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 Jean-Philippe Lemay, Global President and Chief Operating Officer; and Lucas Pontillo, Executive Vice President and Global Chief Financial Officer. Following their prepared remarks, they will take your questions. We have also invited our employees to listen in on today's call and welcome to those of you who currently logged on. Turning to Slide 4. I will provide the agenda for today's call. We will begin by providing highlights from 2020 as well as significant developments since year-end. This will be followed by a discussion on AUM and flows, an update on our investment platform and a review of our investment performance and fourth quarter financial results. We will conclude by sharing a strategic update before opening the line for questions. With that, I will now turn the call over to Mr. Jean-Philippe Lemay.

Thank you, Mariem. Good morning, everyone, and thank you for joining us today. I'm on Slide 5. 2020 was a one-of-a-kind year for all, and I'm proud to say that it was marked by many achievements at Fiera Capital. On the business front, facilitated by our prior investments in our IT infrastructure, our teams did a phenomenal job quickly and seamlessly pivoting to a work-from-home environment, early on in the year and this irrespective of their physical location. We remain present for our clients, advising them and managing their assets with the same rigor and dedication to investment excellence that has always guided us. Turning to the investment platform. Investment excellence persisted. Over 96% of our fixed income AUM and 87% of our equity AUM beat their benchmarks during the year, with many strategies ranking first quartile in both equity and fixed income asset classes. Our private markets platform demonstrated its resilience performing as expected, with little-to-no shocks in the face of high market volatility. What's more, we launched a new private credit and infrastructure debt strategy in 2020. And just last week, we announced the acquisition of an additional Global Equity's capability. The seasoned team of 4 brings a solid track record of performance to the firm, ranking first quartile on a 1-year, 2-year, 3-year and since inception basis and brings with them over USD 500 million in AUM. This addition reinforces our investment platform in order to keep offering this established and thought after investment strategy for clients. And we expect that over time, AUM can grow to north of USD 20 billion. The 4 investment managers making up the team are based in London, Hong Kong, and Sydney, Australia. They are a great addition to our London office, had presence in our Hong Kong office and initiate our footing in Australia. In step with a new global operating model introduced to realign the business to accelerate its global growth, we undertook several strategic initiatives. We announced the sale of the rights to manage the emerging market select mutual fund operated out of New York. Similar to the sale of Fiera Investments last April, this sale allow us to move away from pure retail distribution and remain focused on key distribution channels where we excelled in the U.S. that is an institutional and financial intermediary channels. Note that we continue to offer emerging and frontier market strategies managed out of London office. These cater mainly to institutional and financial intermediary clients. We continued the implementation of our global retention model and saw retention rates in our institutional business increasing, particularly in Canada. Retention rates have been very high now for the last few quarters. This is evidence of the progress we've made in improving the distribution model. Finally, we've initiated a strategic review of our private wealth operations in the U.S., which then led to the sale of Wilkinson Global Asset Management and Bel Air Investment Advisors, further realigning operations in that client channel. On March 1, we announced the closing of the sale of Bel Air, representing $8.3 billion of AUM as of December 31, 2020, when accounting for the $2 billion in mandates, we will continue to sub advise, consisting mainly of U.S. equities. This sale as well as that of Wilkinson allow us to realigning our private wealth business to the fully discretionary model in place across the firm. I will now ask Lucas to cover financial highlights.

Thank you, Jean-Philippe, and good morning, everyone. Assets under management were $180.2 billion as of December 31, 2020, a $10.5 billion or 6.2% increase during the year. Excluding the sale of WGAM, which closed on the last day of 2020, AUM actually reached $182.9 billion, which represents an increase of $13.2 billion or 7.8% over fiscal 2020. Adjusted EBITDA was $61 million for Q4 2020, and the corresponding margin was 31.1%. We generated diluted adjusted EPS of $0.47 per share in the quarter, up from $0.41 per share a year ago. On a full year basis, we generated adjusted EBITDA of $209.7 million, bringing the 2020 full year margin to 30.2%, an increase over the 29.4% annual margin, which we achieved back in 2019. Adjusted net earnings reached $146.1 million in 2020, an increase of $13.5 million compared to 2019. Around this time last year, we increased stress testing of the resilience of our balance sheet on multiple scenarios and running them confidently, by exercising prudence in our capital allocation decisions during the pandemic, we're also able to safeguard the company's dividend during 2020. In addition, last summer, we also launched a normal course issuer bid, and to date have repurchased almost 900,000 shares. I'll now pass it back to Jean-Philippe, who will discuss our AUM and flows along with providing an update on the investment platforms.

Thanks, Lucas. On to Slide 6 to discuss our AUM. AUM increased by $2.5 billion during the fourth quarter. Market appreciation, net of foreign exchange impact contributed $6.9 billion and was primarily driven by positive overall sentiment on use of vaccine distribution, which fueled a market rally in the second half of Q4. We won new mandates of $2.4 billion, mainly in institutional and private wealth and which span our entire range of investment strategies. Equities, fixed income, cross-asset mandates as well as private market strategies. Excluding fourth quarter redemptions from Bel Air, which we have now sold, gross outflows during the quarter were slightly below $2.4 billion. By that same token recorded positive net sales in Q4. The sale of Wilkinson further impacted AUM by $2.7 billion. Excluding the impact of the sale of Wilkinson, December 31, AUM would have been up by $5.2 billion or 2.9% during the fourth quarter of 2020. On a pro forma basis, accounting for the sales of Bel Air as well as the sales [Technical Difficulty] December 31, AUM would have been $169 billion. I will now discuss flows in more detail on Slide 7. Net outflows during the fourth quarter resulted mainly from a combination of strong net inflows of $755 million in our $755 million in our institutional channel and net redemptions of $1.2 billion and $1.1 billion in private wealth and retail, respectively. Excluding the impact of Bel Air, which we have now sold, net organic sales for the overall business across channels and asset classes during the quarter are north of $70 million. In our institutional business, we had another very strong quarter. We won over $1.2 billion in new mandates in both public and private market investment strategies as well as in multi-asset mandates, which range from $60 million to $300 million in AUM. Total new mandates of $1.3 billion contributed accretively to institutional revenues, carrying an average fee rate greater than the rate associated with lost mandates. What's more? Revenue retention in Canada was 96% for the full year 2020, an exceptionally strong result that reflects the efforts that we have invested in enhancing the client interaction model over the past 18 months. Furthermore, and as a result of our commitment of acting as a trusted investment managers for our clients, revenues generated from cross-sales have also increased over the year in Canada. Great work has been done on both retention and cross-selling as part of the new global distribution model, and we expect to roll this model out to our other regions over the coming months. In retail, we won new mandates in the U.S. and in Europe, loss mandates of $1.6 billion consisted mostly of fixed income mandates. We also experienced very strong positive flows in the financial intermediary space in Canada. In private wealth, we won new mandates of $800 million, stemming from private wealth intermediary partners, mainly in U.S. tax-efficient fixed income strategies, which were offset by expected outflows from our legacy business. On Slide 8, you'll see that our public market investment strategies reached $164 billion of AUM as of December 3 representing an increase of $3 billion or 1.9% over the course of the fourth quarter. Including the impact of the sales of Bel Air in the emerging markets fund, public markets pro forma AUM as at December 31 was $157.3 billion. As I just mentioned, we brought on a complementary Global Equity team, reinforcing our investment platform and allowing us to continue offering this high demand strategy to our clients. I'm also very pleased to announce that we promoted Caroline Grandoit to the role of Global Head of Total Portfolio Solutions. Caroline will lead the evolution of our client focused and outcome-oriented portfolio management business through the newly created total portfolio solutions group composed of our multi-asset class and fixed income solution groups and which incorporates our liability-driven investment practice. She'll be focused on ensuring we strive for high-quality, innovative solutions while evaluating further development opportunities in this fast-growing segment of our business. She and the TPS group will continue to work closely with all units of Fiera Capital to offer the best solution in capabilities to our global institutional and private wealth clientele and put forth our public and private investment platforms. In private markets, AUM as at the end of the fourth quarter was $13.6 billion, and we had an additional $1.7 billion of undeployed committed capital. We raised over $400 million in new subscriptions during the fourth quarter, bringing total subscriptions for the year to $1.3 billion, corresponding to a 10.6% organic growth achievement. In 2020, we deployed over $1.1 billion across our private markets' investment platform, notably in agriculture, private debt, and real estate. Our private markets platform contributed strongly to the revenue retention rates in Canada as discussed earlier, sitting at 99.6% for the year. Furthermore, we believe there is a great potential to continue expanding our private markets platform in the retail space through strong distribution partnership. Case in point, we recently expanded our relationship with Canoe as it relates to our private equity strategy. In real estate, I'm pleased to announce that we appointed Richard Dansereau as President and Global Head of Real Estate in January. Richard brings over 35 years of experience in the real estate industry and will be responsible for the global expansion and growth of Fiera's Real Estate business. We will also -- he will also be responsible for the continued optimization of returns and near-term growth of our flagship Canadian platform as well as the U.K. market. As part of his mandate, Richard will lead the Fiera Real Estate group in our efforts to expand on our high-performing organization and grow our business globally. I will now turn it over to Lucas for a review of our financial performance.

Thanks, again, Jean-Philippe. I'm turning to Slide 9. Total revenues for 2020 were $695.1 million. That's up $37.9 million or 5.8% compared to 2019. The firm's fourth quarter revenues of $195.9 million were up $25.2 million or 14.8% when compared to Q3 2020. This was mainly because of the timing of performance fees, which tend to get recorded in the fourth quarter. However, base management fees were also up 2.4% quarter-over-quarter. Compared to Q4 of last year, total revenues were down slightly, mainly impacted by the reduced performance fees during the quarter and lower other revenues and share of earnings in our joint ventures. Let me break this down further for you. Base management fees, which accounted for 84% of total revenues this quarter, did increase $8.3 million year-over-year or 5.3% to reach $163.6 million. This is a testament to the strength of our core business. Our distribution channel, institutional base management fees for the quarter increased $13.3 million or 17% year-over-year, thanks to new mandates won across all our geographies and commanding on average management fee that's of 22 greater than those lost in other mandates. Base management fees from private wealth also increased modestly compared to Q4 of last year, and that is despite the changes mentioned to our Bel Air operations. In retail, base management fees decreased $5.6 million year-over-year, but this was mainly due to the change in the business, stemming from the sale of Fiera Investments, retail mutual funds earlier this year. When looking at performance fees. We generated $22.6 million during the fourth quarter of 2020. This is down $7.3 million when compared to the $29.9 million generated in Q4 of last year. The decrease was mainly from lower performance fees in our hedge fund strategies as well as some select private market investment strategies. Share and earnings in joint ventures. We recorded $1.6 million in Q4 2020. This was down $4.5 million from Q4 of last year. This line item stems primarily from the incremental revenue from Fiera Real estate U.K. joint venture projects and can fluctuate from quarter to quarter depending on the timing of the completion of project. Finally, in other revenues of $8.1 million were $5.1 million lower when compared to last year. The decrease was mainly from lower transaction and commitment fees in our private market investment strategies in the fourth quarter of 2020 as well as the fact that there was a gain that was recorded -- foreign exchange gain that was recorded in the fourth quarter of 2019. Adding to our competitive suite of public and private market investment strategies over the years and further developing our international distribution capabilities as without a doubt, enabled us to grow and diversify our revenue stream. In addition to allowing us to better serve our clients has allowed us to build a more resilient business model in the face of ongoing market volatility. As we close the chapter on an unprecedented year in 2020, we are very pleased with our overall revenue results. Turning to Slide 10. Selling, general and administrative expenses were $140.2 million during the fourth quarter of 2020. This was down $9.5 million or 6.3% from last year. This compares favorably to the increase in base management fees of 5.3% year-over-year. The year-over-year decrease in SG&A was mainly driven by lower marketing and travel costs in response to the pandemic, lower revenue related expenses following the sale of Fiera's Investments Retail Mutual Funds earlier this year and lower performance fee-related compensation expense as a result of overall lower performance fee in the quarter. In addition, the new global model we announced in June 2020 continues to yield results. We realized cost savings of approximately $5 million during the fourth quarter, savings that were redeployed, the key functions of investments and distribution in order to keep driving the future growth of the business. SG&A for the 12-month period increased 3% compared to an 11% increase in base management fees over the same period. The SG&A increase was mainly from higher employee compensation-related costs, including the full year impact of acquisitions, which were completed in 2019. And consequently, 2020 SG&A is a proportion of base management fees of 79.4%, which is down from 85.7% in 2019. Moving to Slide 11. We generated adjusted net earnings of $49.2 million in Q4 2020 compared to $42.7 million in the year ago period. There was an increase of $6.5 million or 15%. This translates to an adjusted EPS of $0.47 per share in Q4 2020 compared to $0.42 in Q4 2019. We recorded a net loss attributable to company shareholders of $1 million or $0.01 per share during the quarter of 2020 compared to net earnings of $3.4 million or $0.03 per share in the fourth quarter of last year. This is explained largely by the net impact of the write-down of the purchase price obligation of $49.3 million and the associated intangible asset write-down of $66.4 million related to our emerging markets, which we announced the sale of earlier this year. The write-down resulted in an increase in net loss of $17.1 million, which was partially offset by the $7 million gain on sale of business and impairment of assets held for sale, stemming from the sales of the WGAM and Bel Air business. During the fourth quarter of 2020, we conducted a review of the company's distribution priorities [ in the United States. ] And in particular, as it related to the Fiera Capital Emerging Markets Fund in which City National Rochdale or CNR is a major investor. The company explored different strategic alternatives for the fund, including with CNR. As part of these discussions, CNR opted to no longer offer the fund to its clients, therefore, ending the revenue sharing arrangement with Fiera Capital. We subsequently announced we had entered into an agreement in principle to sell the advisory business related to the Fiera Capital Emerging Markets Fund. On Slide 12, you'll see that on a full year basis, IFRS net earnings improved by $10 million or $0.10 per share. Adjusted net earnings for the year were $146.1 million. This is up $13.4 million or 10% compared to the $132.7 million for 2019. I'm now on Slide 13. While adjusted EBITDA of $61 million in the current quarter was roughly in line with the fourth quarter of 2019, it is important to note that the adjusted EBITDA margin increased from 30.2% in Q4 of last year to 31.1% in Q4 of 2020. I am pleased to report that for the full year 2020, we generated adjusted EBITDA of $209.7 million, a $16.7 million increase or 8.7% increase when compared to last year. These strong results demonstrate the value of the acquisitions we undertook in 2019 and their successful integration, along with the improvements to our client interaction model and the increased growth of distribution activities. And finally, the operation streamlining initiatives we continue to implement in order to increase our operating leverage within our business. On Slide 14, we continue to execute on our strategic priorities while effectively managing the capital structure. By emphasizing capital preservation during the first half of the year, we strengthened our financial position and enabled the implementation of various corporate initiatives in the second half of 2020. Such, I'm pleased to report that as of December 31, 2020, our funded debt-to-EBITDA ratio for our credit facility is down to 2.6x, down for the third consecutive quarter and exceeding our goal of bringing it down below 2.8x for year-end. We also ended the year with $68.9 million in cash and cash equivalents. In addition, we maintained our dividend returning $87.2 million for our shareholders and paid $2.9 million in the form of share repurchases over the course of 2020. We remain committed to delivering value to our shareholders. And on that note, I am pleased to announce that the Board has once again approved a quarterly dividend of $0.21 per share, unchanged from the previous quarter, which will be payable in April of this year. Furthermore, year-to-date, in 2021, the company has repurchased over 620,000 shares for total consideration of $7.1 million bringing the total Class A purchased or cancellation since the inception of the NCIB to 895,000 shares or close to $10 million of consideration. Furthermore, I'm also pleased to announce that Toronto Stock Exchange has approved an amendment to our NCIB, increasing number of Class A shares we are authorized to repurchase from 2 million to 4 million. Other than the increase in the maximum available -- amount of shares to repurchase, no further amendments have been made to the existing NCIB, which is expected to run until July 14, 2020, '21. The NCIB represents another means at our disposal by which we can return value to our shareholders. I will now turn the call back to Jean-Philippe for a review of our investment performance and the strategic update.

Thank you, Lucas. On to Slide 15. The relative performance of most of our strategies remained strong in 2020 despite the volatility that affected the markets during the first half of the year. Let me share some highlights. In equities, given the growth quality style of many of our large-cap strategies, relative performance was challenged in Q4 but outperformed in 2020 with our global and international equity strategies, generating added value of 4.8% and 12%, respectively. On the long-term basis, our large-cap equity investment team has maintained their first quartile ranking as compared to their respective peer groups. Our U.S. small and mid-cap growth strategy outperformed its benchmark by 4.5% in 2020 and the strategy returned 45% to clients during the year. And despite slight underperformance relative to benchmark in Q4, the strategy generated 23.1% during the quarter. Our Frontier Markets investment team delivered excellent fourth quarter performance with the strategy returning 29.4% and delivering value-added return of 18.2%. More impressive still with the stellar Q4 first quartile performance, the team has reversed course on the challenging first 9 months that cap the year off with above benchmark returns. We also launched a smaller emerging market opportunity strategy in Q4 with that same team. In fixed income, our active core and strategic core strategies beat their benchmarks by 2% and 2.2%, respectively, during the year and continued to rank first quartile for 2020. The outperformance within the active universe group of strategies was driven primarily by curve positioning and tactical allocation credits as credit spreads peaked, which delivered value as spreads began to decrease. The company's other fixed income strategies, which include credit strategies, preferred shares, and infrastructure bonds outperformed their benchmark in the last quarter as well as for the whole year and delivered value-added relative to their respective benchmarks on a long-term basis. Turning to Slide 16 for a review of select private market strategies. We saw strong performance across all key strategies in private markets in 2020, demonstrating the resilience of the platform throughout this volatile year. The Canadian real estate strategies delivered strong returns in the fourth quarter. Since the downturn in the second quarter of 2020, driven by COVID-19 related uncertainty, these strategies have recaptured significant value. I'm also very pleased to report that 2 of Fiera Real Estate funds are ranked at the top of the MSCI/REALPAC index. The Fiera Real Estate Industrial Fund ranked first of the 9 contributing funds for both Q4 and full year 2020 and the Fiera Real Estate Core Fund LP ranked second for Q4 2020. The portfolios are constructed to be more evaluated to exceptionally strong industrial and logistics space and hold only retail properties in the more stable food and on improvement anchored categories. The company's private debt strategies globally continued to deliver attractive positive returns during the fourth quarter of 2020. Yields and default rates improved in the last quarter as many of the loans that were previously in a deferment program came back online or were paid off. The resilience of the portfolio highlights the benefits of diversification across regions and strategies, the conservative loan-to-value ratios and the primarily secured -- senior secured loans, all of which are all marks of our strategy. As financial institutions continue to tighten their lending criteria and deal with loan loss provision throughout 2021, quick and agile lenders such as Fiera Capital's private debt teams anticipate increased market opportunities with quality borrowers. Of note, our Asia lending opportunities fund generated a 2.79% during the fourth quarter and the fund's IRR since inception is a solid 11.9%. Both our infrastructure and global agriculture strategies continued to perform well, generating a positive fourth quarter 2020 and year-to-date returns. The strategies, internal rates of return since inception are of 9.7% and 8.7%, respectively. I'm extremely pleased with the work of our teams during what has been an extraordinary year. They have been very proactive in managing their assets jointly with our portfolio companies, platforms, borrowers and partners, contributing to strong performance across the platform. I'm now on Slide 17. We continue to execute on our strategic priorities and the global operating model announced this summer was an essential step in the firm's evolution. We have made significant headway in advancing this model and on our other corporate priorities during the fourth quarter and in early 2021. The strategic sales we announced early in 2021 are directly aligned with the implementation of our integrated global model. We enhanced our investment platform and client offering with the acquisition of an additional team. We continue to make progress on the global distribution model now in place. And on the business operations side, we continue to invest in integrated and consolidating our platforms globally. And as Lucas just mentioned, we amended our NCIB to increase the number of shares we can purchase for cancellation. Building on our already solid foundation, these initiatives will allow us to grow and become more competitive on a global scale. We have been fully operational in a work for home environment for a year now. And our ability to execute on our strategic priorities has not been affected. For this, I have to underscore the outstanding contribution of all of the firm's employees. Their relentless commitment is directly credited for the culture of excellence and superior client servicing that defines Fiera Capital. Finally, as we explained on our last call, effective January 1, we started tracking AUM under slightly modified distribution channels and asset classes. For illustrative purposes, we've provided a reconciliation of AUM to the new channels and asset classes in the appendix of the Q4 2020 earnings presentation. This concludes our prepared remarks. I will now turn the call to the operator. [Technical Difficulty]

[Operator Instructions] Our first question will come from Geoff Kwan from RBC Capital Markets.

My first question was just on your adjusted EBITDA margin. So you're now, I'd say, consistently exceeding the 30% adjusted EBITDA margin level. I wanted to get your thoughts on how you can expand the margins further. And how you think about that?

I mean I think at this point, we've highlighted strategically sort of plans that we have in place, but JP elaborate on them. But obviously, there was the global realignment that we announced last year. And that's going to have several streams to it, whether it be sort of continued investing in our investment capabilities as well as increasing our global distribution reach as well as rationalizing some of the expenses as we look to consolidate some of the business support functions that were underpinning the business. So JP, do you want to maybe pick it up from there?

Sure. I think the main -- the 2 main points here are the focus on optimizing the commercial potential of our investment platforms that we have right now and that we're continuing to expand. And by doing this jointly in a very effective manner in a globally oriented mindsets. And I think with these 3 ingredients and the quality of the both the distribution model and the strategies that we have in place right now, we'll be able to foster an environment that will be conducive to continued expansion.

Okay. My next question was just at the start of the month, the National Bank announced some portfolio management changes with respect to some of their funds. My estimate was it might have a $1.2 billion to $1.3 billion redemption impact for Fiera. Just wondering if you can comment if my math is correct, but also to any commentary on the timing of the redemptions in each and also the impact to management fees on an annualized basis?

Sure. I can give you some color on that. Obviously, we're very in tune and in close relationship with National Bank on these structural changes. From our perspective, we expect the amount of AUM to be slightly lower than your expectation, probably around $0.75 billion -- $700 million. And considering the different strategies that will be impacted on our end. We expect this to have a minimal impact on an annualized basis from a revenue standpoint to the tune of about $1 million. That's our expectation at this point.

Okay. Sorry. And that's $1 million per year and probably to see the redemption in -- is it would be Q1 or Q2?

Yes, there's a bit of uncertainty in terms of the exact timing at this point, but that's in that time frame.

Okay. And that $1 million is on a per-year basis, correct?

Yes, annualized basis. Yes, exactly.

Okay. Perfect. And very last question was the investment performance data that you've given, the MD&A for the public and private strategies. Are there strategies that are not included in those exhibits? And if so, like what would be those types of strategies? And kind of what percentage of AUM would they comprise?

Sure. The strategies that were not presented there are more strategies that are more kind of exposure management are related to particular client objectives. That are not necessarily tied to a particular market-based index or benchmark. So we can probably give more color in terms of what that AUM represents, but I can assure you that the key strategies from a relative performance standpoint focus or value-added focus are all presented in the MD&A that are material for the platform.

And our next question comes from Gary Ho from Desjardins Capital Markets.

Maybe a bit of a high-level question. You've done a few dispositions, Bel Air, Wilkinson, CNR and also a small team lift out here. Are there more on the radar that we should be aware of and are you able to comment on the announced disposition, what the revenue and/or kind of EBITDA contributions were?

Yes. Maybe I'll let Lucas give a perspective on the financial, and I'll comment on the strategic aspect of things, Lucas?

Sure. So just on the revenue side, those combined 3 businesses, so WGAM, Bel Air, and CNR, they were generating roughly CAD 100 million on 2020. And we expect that the marginal contribution, there'll be a short-term dilution to the margin of about 1% relative to that activity. But we're quite comfortable we can make that up relative to the amount of refocusing management's attention and the internal resources that we're committed to supporting those businesses in the past. So I'd say there's a slight dilution on margin in the short-term but nothing we're concerned about handling at this stage.

Thank you, Lucas. On the strategic side, I would say that year 2020, as you can see, has been busy on realigning the priorities and the focus from a business standpoint, especially when we look at the U.S. I would say that we're now feeling that we're in a pretty good place on that regard and that we -- yes, we're feeling pretty good in terms of where we are right now at this point.

Got it. And then just on the CNR piece, was there any kind of cash consideration received as a result -- sorry, if I missed this during the MD&A?

There will be. We haven't disclosed that. To say the announce -- the announcement was with regard to the preliminary -- sort of preliminary transaction. So we have not disclosed any proceeds related to that.

Okay. And then I guess related to audit, what would be the funded debt ratio? I know you said 2.6x was at the quarter end. How would that look like on a pro forma basis if you perhaps include an amount with cash received as well as kind of removing the associated EBITDA from these businesses.

Yes, we don't want to give forward guidance on that, but we'll stick to sort of the target that we had of 2.8 million at the end of the year, which we did manage to exceed. But as you know, Gary, Q2, in particular, for us, is a heavy cash required quarter for the fact that we paid 2 dividends. So I think maintaining the Q1 at about 2.8% is a comfortable number for us at this point.

Got it. And then just last one, a few years back when we saw a spike in yields, [ that ] management at the time provided color on interest rate sensitivity, just given your fixed income exposure. Are you able to share an updated sensitivity to either AUM and/or revenue? And any color on fixed income flows so far in Q1?

Sure. I can provide color there. Thank you for the question, Gary. We've reassessed the estimation, and that's really kind of an approximation, but you can maybe have that in terms of a basis to forecast 25 basis point shift in interest rate overall level would translate into approximately a $1.7 million change in annualized revenues coming from the fixed income platform. So that's kind of the estimation or rule of thumb that we're using.

Got it. And then any color on flows so far in the fixed income?

On the fixed income side, year-to-date, we don't see any particular or increase in flows one way or another at this point.

Your next question comes from Cihan Tuncay from Stifel.

Just a couple of questions from me. So if we talk about all the different puts and takes. There's the Bel Air sale, Wilkinson sale, CNR as well as balancing that with margin expansion. And if I kind of do some rough math with the impact on AUM, I'm coming up at about mid-single digit adjusted EBITDA growth for 2021. I'm just wondering is there anything that could potentially take that number significantly higher or lower? Or how should we think about just overall growth expectations for this year, given all the puts and takes and the changes in the business?

Well, again, without commenting on forward moving -- forward-looking statements but to your point in terms of what could be the largest catalyst and then frankly, it's the market, right, that we saw it in 2020 in terms of the impact the market can have. And that's going to be the biggest driving factor for us in 2021, much the same way.

Well, I appreciate that. And just with respect to a couple of years ago, we talked about being a top 100 global asset manager. Just wondering if as you look forward from this point here on, could you talk about kind of your strategic growth opportunities to help me target? Or if that target has shifted? Or any updates on that front?

Sure. Thank you, Cihan. I think the ambition and the objective strategically when we look ahead is continued to be a top-of-mind global asset manager. Our opportunities for growth spend many, many opportunities. When I think about our public markets' platform and our private markets platform, we have tremendous opportunities to continue to expand, both from a client residency standpoint but also from a capital deployment standpoint when I think about regions of the world. And at the same time, I mean, we've intention -- very intentionally restructured our distribution capabilities to be able to maximize and have that strong collaboration between the opportunities that we see for our clients and our platform, but also making sure that we're providing the proper advice as we move forward with our clients. So I mean, our focus is all about quality and excellence of execution on both of these fronts. And we believe that continuing to focus on these key priorities will help generate the ambition and position the firm properly as we move ahead. So that's our intention and our vision.

Appreciate the color there. Just 1 last question from me. With respect to the relationship with Natixis, they're going through a strategic change. I'm just wondering if you've had any interaction with EPCE and how -- or the new management group at Natixis and how they view their position in the asset management industry going forward and any potential impact on the relationship with Fiera?

So our relationship with Natixis has been continuing to be very strong and developing and continue to be strengthened. I guess we've done a lot of good things together over the past -- since we did the deal, both on the distribution front from an affiliate standpoint in Canada, but also partnerships and distributing our strategies across the globe in their footprint. And as it relates to corporate events, on their side, we -- from our perspective, it doesn't change their commitment to the organization and their partnership with us as an important shareholder for the firm.

Your next question comes from Scott Chan from Canaccord Genuity.

So just on performance fees for Q4, down 24% year-over-year. Can you maybe kind of talk about how do we think about, I guess, performance fees going forward? And perhaps, what was the variance versus last year considering your old funds had pretty good absolute performance and your assets grew during 2020.

Sure. So I can -- okay. Go ahead, Lucas.

Do you want to talk on the performance side, JP and then I can fill in the numbers?

Sure. I mean, maybe just a precision here. On the disposition, just to be clear, on the dispositions that we've announced, none of these businesses had a performance fee contribution. So it's really related to particular circumstances on the return side, one of which has been the return, which was a great return, about 7.5% for 2020. But still lower than in the past years for 1 of our hedge funds out of London that contributed to the decrease and also specific situations in the infrastructure platform as well, which were the main contributors in the decrease this year. But as we look ahead, our main contributors of performance fees are still very well positioned for the future.

Yes. And just in terms of the impact, so we were just shy of $30 million in performance fees last year at $29.9 million; this year at $22.6 million. As JP mentioned, the -- in terms of structurally, the 3 that contributed to that were, 1 was largely the hedge fund that we talked about in Europe. And then we had some minor reductions, both on infrastructure and real estate relative to some performance fee activity this quarter.

Okay. Great. And your fund performance that you kind of highlighted in the opening remarks continues to be very strong across all asset classes. And kind of when I look at the total net flows, it seems to be not reflective of your performance. So perhaps maybe you can update us on some of the enhancements that you talked on the distribution side? And perhaps, is it more of a gross sales or gross redemption issue in this environment?

Sure. Maybe I can comment further a bit on the actual results for Q4, which were driven mainly by the particular event in Bel Air that we talked about at the previous quarter that continued to impact our net flow. So that's an important amount and specific structural changes from one of our financial intermediary partner on the fixed income side, that also amounted to north of $1 billion of redemptions. But when we look at the institutional and some other financial intermediary partnerships that we have, Q4 flows have been strong and continue to support the great performance that we're observing in all of our strategies. So in terms of the client interaction model that you're referring to, it's really a story of focus and discipline and specialization. I mentioned, I think, in the past that we are augmenting our capability specialists or focused dedicated sales workforce that are specialized by asset class, whether it's in private or in public markets. And we believe that it's going to be a key driver of growth in the future. But also at the same time, and I think I've highlighted that as well in my comments is the focus on the way we interact with clients and the focus on retention has also been a key objective in our restructuring of our global distribution capability, and we're already seeing results. And we hope that this retention behavior will continue to express itself over the coming quarters. So I mean, structural changes are there sometimes, and they happen. But fundamentally, what's happening in the business and the ability for us to capture the opportunities of growth and retain assets from our current clients is key to us.

Okay. And just lastly, on the new global equity platform from AMP you kind of talked about a target of over $20 billion over time from $500 million, which I think is all seed capital right now. What kind of gives you the confidence for this kind of solid asset growth within this team? And does Fiera, if it does achieve it, do they achieve 100% economic benefits from this?

Yes. So thank you for the question. Maybe just a precision on the nature of the current capital and the strategy that we've onboarded. I would say that north of 80% of that asset base is third-party assets, so not seed, but really current clients that are putting money towards the strategy. So many reasons, which are making us believe a very strong belief in the new addition and the new team. First of all, their strong track record in the past, and it translates into numbers, but also when we look at the quality of the investment process, the philosophy and alignment, the client ultimate objectives we are very, very, very confident that the team will be successful over the long-term. And that's an important part of the reason why we intentionally chose that team to join Fiera. They have a very, very strong process and very strong long-term alignment in line with how we believe and how we think about adding value in global equities. And we just see the constant interest in the asset class. Many, many of our clients, both institutionally, financial intermediary, and on the wealth side, it's a key asset class for the future, a key contributor. We also believe that in that space and in that market, there's opportunities, inefficiencies that are as conducive to active management. So putting all of these things together and the strong team that we've onboarded, we believe will be successful in that space.

Your next question comes from Graham Ryding from TD Securities.

All right. Just to follow-up on that last theme. So am I correct, I guess, that the new Global Equity team that the strategy is compatible enough with your existing Global Equity team that you feel like you are positioned to whatever flows that you're potentially going to lose from capping the existing strategy? Or do you feel like you'd be able to make -- make up for that with the new team? Is that your belief?

Yes. Thank you, Graham, for the question. I mean, 1 of the business objectives of welcoming that team into our fold was really to continue our ability to capture growth in the asset class. And yes, you're right. I mean we feel the strategy is extremely complementary to what we have. And we'll be able for us to continue to capture flows and be successful in the asset class. And that's the reality of where we were. We're extremely successful in the strategy that we have in place. Now in getting to a point where capacity is more limited, and we feel we had to continue to expand in that asset class.

Okay. Understood. And I apologize, but the sale of your emerging markets fund in the U.S., could you just reiterate what the logic was there? Was that driven by your partner? Or was it a decision on your part?

So it's a decision that came from both sides. Well, first of all, when we look at the actual focus of the distribution channel, it's the realignment to the distribution channel and distribution strategy that we have in the U.S. and in Canada. In fact, where in the past, we've kind of went away from direct retail, but really operated that channel and expanded in that channel through distribution partnerships. So that was one. But at the same time as well, there was an intention as well from the main anchor investor to move away from the strategy. So it kind of went hand-in-hand together.

Okay. Understood. And then my last question, just, I believe there was an FX loss that contributed to lower revenue in the other income line. Is there anything you can quantify? And how much of that perhaps weighed on revenue and the margin in the quarter?

No. So that was just relative to prior year where we had a gain. So the comment was meant to reflect the fact that the quarter-over-quarter we had a comparative decrease in other revenue because we had booked a gain in the 2019 quarter, which wasn't the case in 2020.

Your next question comes from Jaeme Gloyn from National Bank Financial.

Just 1 question for me, actually, and it's just on that global equity strategy. Can you just refresh me where the AUM is on that strategy? And if I'm looking at the performance in the fourth quartile -- in the fourth quarter, surprisingly weak, well, I guess, maybe not surprisingly weak, given the growth underperformed. But this is the first time we've seen a fourth quartile performance for that strategy. Are you seeing or hearing that any feedback around that? Or how has that impacted the strategy here in 2021?

Yes. Thank you, Jaeme. So on the performance side, the actual underperformance given the macro environment in Q4 is actually not surprising at all. I mean it's actually expected. And most of our clients institutionally and even beyond are expecting that that the [Technical Difficulty] will be remain true to itself. So I mean, from our perspective, the relative performance in Q4 is 100% in line with our expectation in the macro environment that we've lived through. So that's the comment on the performance side. In terms of the amplitude, it's about -- it's around -- it's not a $50 billion of AUM in that -- in global, U.S. and international, probably more in the $55 billion at the end of the year and roughly represents 30% of our revenues. So that's the color on what the strategy -- the 3 strategies represent for our organization.

We have no further questions in queue. I'd like to turn the call back over to Ms. Elsayed for closing remarks.

Thank you, Juli Anne. That concludes today's call. Thank you for joining us.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.