Fiera Capital Corporation (FSZ) Earnings Call Transcript & Summary

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 First Quarter of 2025. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] I would now like to turn the conference over to Ms. Marie-France Guay, Senior Vice President, Treasury and Investor Relations.

Thank you, Sylvie. Good morning, everyone. Welcome to the Fiera Capital conference call to discuss our financial results for the first quarter of 2025. Note that today's call will be held in English. 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. Also 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. On today's call, we will discuss our Q1 2025 results, starting with an update on our AUM flows, followed by highlights of our public and private market platforms as well as our private wealth business. We will then review our financial performance. Our speakers today are Mr. Jean-Guy Desjardins, Chair of the Board and Global CEO; and Mr. Lucas Pontillo, Executive Director and Global CFO. Also available to answer questions following the prepared remarks will be Maxime Menard, President and CEO of Fiera Canada and Global Private Wealth; and John Valentini, President and CEO of Private Markets. With that, I will now turn over the call to Jean-Guy.

Thank you, Marie-France. Good morning, everyone, and thank you for joining us today as we report our results for the first quarter of 2025. Global equity markets were mixed in the first quarter of the year. Risk appetite deteriorated significantly in the last month of the quarter as investor fears intensified that a trade war would reignite inflation and dampen growth. The S&P 500 was hit the hardest, declining nearly 5% for the quarter, while the Canadian Benchmark Index managed to eke out a modest gain, thanks to solid returns in resources. Global stocks outperformed their North American peers as Germany's fiscal spending plans boosted the outlook for European economies and corporate earnings. Fixed income markets were positive in the quarter as investors fled to the safety of bonds with investors bracing for the impacts of lingering trade tensions on growth. Speculation mounted that the Federal Reserve would soon need to pivot from worrying about sticky inflation towards fading about a stagnating economy. Similarly, in Canada, fears about U.S. tariffs pushed government bond yields broadly lower even as both growth and inflation surprised to the upside. So against this backdrop, our assets under management ended the quarter at CAD 161.6 billion, representing a decrease of CAD 5.5 billion for the quarter. This decrease was attributable to a previously announced outflow in assets under management sub-advised by PineStone. We are particularly pleased that excluding PineStone, we experienced positive net organic growth of about CAD 550 million in the quarter. Assets in our private markets platform grew by CAD 1.4 billion or 7% to CAD 21.1 billion during the quarter, driven by the acquisition of a controlling interest in a real estate investment platform in the United Kingdom, which increased our assets under management by more than CAD 900 million. Growth was also helped by positive market impact of approximately CAD 400 million and more than CAD 120 million in net organic growth during the quarter, driven by new mandates of approximately CAD 500 million, primarily from our agriculture and real estate strategies. Our public markets assets under management, excluding those sub-advised by PineStone, increased by 1% to more than CAD 104 billion during the quarter, driven by positive net organic growth of more than CAD 400 million and market impact of approximately CAD 300 million. So I will now turn to highlights of our commercial and investment performance across our asset classes. So starting with our public markets platform. Excluding assets under management sub-advised by PineStone, public markets saw good flow activity during the quarter, reporting new mandates of CAD 1 billion and positive net organic growth of more than CAD 400 million. With respect to assets sub-advised by PineStone, as previously announced, Canoe Financial withdrew CAD 5.7 billion of assets and transferred them directly to PineStone during the quarter. An additional CAD 1.2 billion of assets sub-advised by PineStone were withdrawn by clients with which we have ongoing relationships. As we announced at the end of April, we will be winding down our Canadian equity small and microcap strategies as part of our strategic decision to focus our business on our more scalable strategies. These strategies represented less than 1% of both our total assets under management and total revenues for 2024. Turning to investment performance in public markets. The macroeconomic environment has been challenging for financial markets. We have been positioned defensively since the fourth quarter of last year, driven by the reacceleration of inflation in the second half of the year, the resilience of the U.S. economy, which was operating at an above-trend pace and a strong job market with unemployment at historic lows. As a result, most of our flagship strategies performed well and generated positive relative returns in the first quarter of the year. Within Canadian fixed income, our strategic core strategy delivered strong excess returns relative to its benchmark in the quarter, driven by active positioning along the curve. Our active core and integrated core also outperformed benchmarks for the quarter and all 3 strategies generated alpha over the 1, 3 and 5-year periods. Relative returns for the quarter were mixed for foreign fixed income strategies. The global multi-sector income strategy outperformed its benchmark by more than 70 basis points in the quarter, driven by long-term active duration across U.S. and Mexican fixed income markets and from strong security selection within emerging markets. The high-grade core intermediate strategy modestly outperformed in the first quarter, while the tax-efficient core plus strategy came in below benchmark. All 3 strategies continue to outperform benchmarks over the longer term. Our Canadian equity strategy had top quartile performance during the quarter as it outperformed its benchmark by close to 240 basis points. The portfolio's lead over the S&P/TSX widened once more, driven mainly by stock selection. An overweight position in the better capitalized domestic banks paid off when credit loss provisions surprised on the downside. Turnover stayed below 15% and active share above 70%, underscoring a conviction-led long-horizon approach. Despite a challenging quarter for the Frontier Markets strategy, the strategy continues to deliver notably strong relative performance across all medium and long-term periods, including since inception for which it has generated over 16.6% of value added for investors. And lastly, the Emerging Markets Select strategy outperformed its benchmark and maintains an impressive track record, outperforming its benchmark by over 9% since inception in 2021. Turning to our private markets platform. The private markets delivered positive net organic growth of approximately $120 million during the quarter after returning capital of close to CAD 140 million. Growth was driven by new mandates of approximately CAD 500 million, primarily from clients into our global agriculture fund and in our real estate strategies. Close to CAD 500 million of capital was deployed in the quarter and we maintained a robust pipeline of CAD 1.5 billion in committed undeployed capital for future opportunities, an increase of CAD 600 million compared to the end of the prior quarter. With respect to investment performance, our private market strategies performed well in the quarter with our key strategies all generating positive returns for the quarter and absolute returns of 5% to 12% over the 1-year period. Our infrastructure strategy returned 2.3% for the quarter and nearly 9% over 1-year, benefiting from the long-term contracted nature of the majority of its revenues, inflationary hedging and limited revenue exposure to trade. Our private credit strategies also generated attractive returns for the quarter and 1-year period. Our infrastructure private debt strategy produced a 12% absolute return over the 1-year period as positive income from investments was supported by favorable movements in base rates. These underlying investments are generally well insulated from macroeconomic and geopolitical volatility and the team is expected to deploy significant capital in the remainder of 2025. Within our real estate debt strategies, the void left by traditional lenders continues to create outsized risk-adjusted return opportunities with a lack of correlation to the broader financial markets and economy. Within corporate private debt, Canadian borrowers have been minimally impacted by U.S. tariffs due to conservative loan structures and a focus on the Canadian middle market, which primarily involves domestic customers and suppliers. The deal pipeline remains very strong as reduced lending by Canadian banks has allowed us to access higher quality credit, while maintaining a senior secured position with stringent covenants and a focus on capital preservation. Our global agriculture strategy performed well in the quarter and generated a nearly 9% return over the 1-year period. The strategy has a strong pipeline of follow on opportunities and new partnerships across Canada, the United States, Australia and Western Europe. In real estate, the industry is poised to benefit more consistently from the macroeconomic tailwinds from increasing market liquidity and Central Bank rate cuts. Canadian and U.K. real estate equity strategies produced good returns in the first quarter, which reflected this underlying positive momentum. Now turning to private wealth. Private wealth assets under management decreased during the quarter to close at CAD 14.2 billion. Gross new mandates were robust at approximately CAD 400 million, the highest level of new mandates since 2022. We continue to see the benefits from the regionalized distribution model as we build deeper relationships with existing and new clients to drive sales growth. However, the quarter was impacted by negative contributions, primarily from one larger withdrawal from a client out of fixed income mandates. So with that, I will turn it over to Lucas for a review of our financial performance.

Thank you, Jean-Guy, and good morning, everyone. I will now review the financial results for the first quarter of 2025. Beginning with total revenues. Across our investment platforms, we generated total revenues of CAD 163 million in the current quarter, down 3% from CAD 168 million in the same quarter last year as a year-over-year growth in base management fees and higher commitment and transaction fees were more than offset by lower performance fees, other revenues and lower contribution from our joint ventures. Base management fees grew to CAD 155 million in the quarter, up 2% from the prior year, driven by an increase in our private markets AUM and a higher overall management fee rate. Turning to public market revenues. Base management fees of CAD 105 million in the quarter declined by CAD 1 million or 1% for the same quarter last year, largely reflecting outflows from PineStone sub-advised mandates. This was partly offset by higher revenues from financial intermediary clients in the U.S. and EMEA and from institutional clients in Canada and Asia. Despite outflows related to PineStone sub-advised mandates over the last 12 months, base management fee revenue within public markets remained resilient and our fee rate remained relatively flat year-over-year. Performance fees were nil during the quarter, down from fees of less than CAD 1 million in the same quarter last year. And other revenue of CAD 1.5 million in the quarter were down from CAD 3.5 million in the same quarter last year, largely reflecting revenues related to an insurance claim in the prior year quarter. Turning to private market revenues. Base management fees increased by CAD 4 million or 9% year-over-year to CAD 49 million for the quarter. The increase was primarily driven by higher assets under management in real estate, agriculture and infrastructure, reflecting new subscriptions and the acquisition of a controlling interest in the U.K. real estate investment platform. Commitment and transaction fees of CAD 2 million were CAD 1 million higher year-over-year due to higher fees earned from clients in EMEA in the current quarter. Performance fees of CAD 200,000 during the quarter were approximately CAD 2 million lower year-over-year, reflecting higher performance fees in the prior year quarter from our global agriculture fund. Share of earnings in joint ventures related to our U.K. real estate business were close to CAD 3 million in the quarter, a decrease of CAD 4 million year-over-year related to the timing of completion of our joint venture projects with the first quarter realizations in 2024 being particularly high. Completions are expected to be later in the quarters this year. Our private markets platform comprised 13% of our total assets under management in the quarter and generated 34% of total revenues. This platform continues to provide attractive revenue growth and diversification to our business. Turning to SG&A. For the quarter, SG&A expenses of CAD 122 million were down more than 3% from the prior year, mostly due to lower employee compensation costs and sub-advisory fees and partly offset by higher travel and marketing costs. Turning to adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA of the quarter was CAD 43.4 million, down CAD 2 million or 4% from the same quarter last year, reflecting lower performance fees and share of earnings in joint ventures and partly offset by lower SG&A, excluding share-based compensation. Our adjusted EBITDA margin was 26.6% for the quarter, largely flat from 27% the same quarter last year. Looking at earnings. Net earnings attributable to the company's shareholders were CAD 22 million or CAD 0.17 per diluted share for the quarter, up from CAD 8 million in the same quarter last year, largely due to a CAD 12.7 million reevaluation gain related to our acquisition of a controlling interest in the U.K. real estate investment platform. Total net earnings generated this quarter also had an impact on our average fully diluted shares outstanding. Excluding share dilution resulting from the hybrids, our average shares outstanding would have been 111 million compared to 140 million for the quarter. On an adjusted basis, net earnings were CAD 25 million or CAD 0.20 per diluted share for the quarter. Excluding share dilution from our hybrids, net earnings for the first quarter would have been CAD 0.23 per share, down CAD 0.01 from the same quarter last year. And finally, last 12 months free cash flow of CAD 87 million was flat from the prior quarter and up from CAD 72 million in the prior year quarter. Turning to our financial leverage. Net debt was just over CAD 700 million at the end of the quarter, up approximately CAD 50 million from the end of the prior quarter, reflecting higher cash used in operating activities, as is usual, the case in the first quarter of each year and the purchase of additional interest in the U.K. real estate platform during the first quarter. The quarter-over-quarter increase in Q1 is consistent with prior years and largely reflects timing of cash outflows that occur in the first quarter of the year. As such, our net debt ratio increased to 3.6x from 3.3x in the prior quarter and our funded debt ratio, as defined by our credit agreement, increased to 3.27x from 3.06x in the prior quarter. Delivering value to our shareholders continues to be a fundamental pillar of our strategy. To that end, given the uncertain and rapidly changing macroeconomic environment, we have recommended to the Board to reduce the quarterly dividend. While free cash flow remains resilient and is expected to continue to improve going forward, we wanted to ensure that we maintain the financial flexibility to invest in accretive opportunities such as share buybacks and strategic growth initiatives, all the while reducing our leverage. As such, the Board has approved a quarterly dividend of CAD 0.108 per share payable on June 19, 2025 to shareholders of record on May 22, 2025. I will now turn the call back to Jean-Guy for his closing remarks.

Thank you, Lucas. 2025 is proving to be an eventful year in numerous aspects. While we are being faced with a volatile market environment, we are pleased that efforts undertaken over the past few years to transform to a regionalized distribution model are largely complete and are bearing fruit with positive net organic growth, excluding assets sub-advised by PineStone achieved in the first quarter of 2025. This is also a testament to the strong long-term performance achieved by our investment teams across our platforms. However, we are facing a challenging macroeconomic outlook and continued uncertainty. So in this light, we have made the difficult decision to reduce the quarterly dividend. This action enables us to establish a more balanced approach to capital allocation aimed at providing additional financial flexibility. So this proactive approach also gives us greater ability to accelerate deleveraging and invest in future growth opportunities as they arise to ultimately enhance shareholder value. So lastly, as you may have seen from our release last night, the Board and I are pleased to announce the appointment of Maxime Menard as Global President and Chief Executive Officer, effective July 1, 2025. As Founder and Executive Chair of the Board, I will continue to be involved in the strategy of the firm in the oversight of our public markets platform and lead the global asset allocation activities, including portfolio construction and multi-asset solutions. So I am confident that Maxime's leadership skills, deep understanding of the industry and of Fiera's culture make him the right choice to steer the firm's next phase. I am also pleased to announce that Gabriel Castiglio, Executive Director, Global Chief Legal Officer and Corporate Secretary, has been appointed Executive Director and Global Chief Operating Officer. He will work closely with Maxime to enhance the effectiveness and efficiency of the firm's operating model. Lucas Pontillo, Executive Director and Chief Global Financial Officer, will now also lead Corporate Strategy, expanding his current mandate. In his role as Executive Director and Global Chief Financial Officer and Head of Corporate Strategy, he will work closely with Maxime to shape the firm's strategic direction. Together, Maxime, Gabriel and Lucas will continue to drive growth and promote sustainable shareholder value. So I will now turn the call back to the operator for the question period.

[Operator Instructions] First, we will hear from Etienne Ricard at BMO.

Maxime and Lucas, congrats on the new responsibilities. I'd like to start on capital allocation given the dividend announcement. So you'll be generating close to CAD 50 million in excess free cash flow beyond the new dividend level. What are your priorities as it relates to financial leverage, buybacks and acquisitions?

Thank you, Etienne. Great question. I mean as we looked at the decision on the dividend, and as Jean-Guy mentioned, not an easy one, but the right one, we think for the firm. In the face of uncertain economics, we wanted to make sure that we had a glide path to, in the worst possible economic scenario, really focus on deleveraging and be on a path where by the end of 2026 we can have a funded debt ratio that would be comfortably below 2.75x even in the face of the worst economic circumstances. So certainly, in that type of a scenario, the focus for capital allocation would be strictly on deleveraging and making sure that we've got a very resilient balance sheet to weather any type of economic storm. The other scenario we looked at in a much more favorable economic environment is one where we would have the excess capital to sort of target, let's say, a funded debt ratio below 2.25x by the end of next year. And in addition to deleveraging, that would give us ample opportunity to do things like share buybacks. We continue to believe that the share is significantly undervalued and it would be in the best interest of our shareholders for us to reinvest in the company's stock and at the same time redeploy on opportunities similar to what you saw us do in the first quarter with regards to our investment in Packaged Living, the U.K. investment firm that we already had an interest in, but to be agile and to be able to take advantage of such opportunities as they present themselves in the market.

Okay. And Maxime, since joining Fiera about 2 years ago, what are some key learnings that you've acquired? And how are these impacting the way you're thinking about shaping the strategy going forward?

So I think my appreciation for the investment platform has obviously evolved from looking at it from a competitive standpoint before joining. And as I spent the last 18 months understanding the depth of the investment solutions, I've grown to have a found appreciation for what we could bring to markets. We've seen some early results in Canada over the first quarter, but more to come in Q2 in terms of our success. How does that help me to shape the next phase of it is going to be a lot about accelerating execution from a sales cycle point of view and also internationally making sure that we double down on some of the low-hanging fruits opportunities that we have in these different markets. Again, in Canada, we've seen some early success in the public markets, also in the private markets. We're looking forward to announce more in the next few quarters. And again, from speaking to Eric in the U.S. and Klaus and Rob in Asia, we are well underway to be able to execute on some really good results. So looking forward to continue to accelerate that regionalized strategy and implementing our distribution scenarios that we had built 1.5 years ago even prior to me joining.

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

Maybe a question for Jean-Guy. So just on the back of the CEO transition announcement that you just provided, just curious to hear kind of your thoughts on timing. I know you're very active in many of the silos within Fiera, investment management, private clients, et cetera. So it sounds like you're still going to be pretty hands on, on the -- after the hands-off transition on July 1. Just wondering your thoughts there.

Well, what we just did is we executed on the plan. If you recall, when I came back, I agreed with the Board that I would be coming back for a maximum of 3 years. And when you think about it, it's 2023. And very, very early towards late 2023, the Board asked me to come up with a succession plan, which I did present to the Board. And part of the succession plan is being implemented today. And I had identified, I think I said that publicly, I had identified 4 potential candidates after when Max joined, we had 4 candidates. And towards the end of last year, the choice became, at least to me and to the HR Committee of the Board with whom I was constantly discussing that issue as we were coming close to the end of my 3-year term, it became increasingly favorable towards Maxime. And early this year, in the first quarter of this year, the decision was made to move forward with the changes that we just communicated today. So July 1 is -- if you think in terms of December 31 being the end of my committed mandate to the Board, it's just barely 6 months before the end of that arrangement. And I think it's been -- I think the transition from my coming back at the beginning of '23 to where we are today has been as per plan. What we executed is exactly the plan that I had presented to the Board at the beginning of '23 when they asked me to come back. And the transition to the new leadership, especially in the context where there's Max and there is Gabriel and there's Lucas, who are impacted by these changes and new responsibilities, I think is -- I'm very happy about how we have executed on those fronts over the last 2.5 years. So everybody is very excited now, including myself, about moving into the next phase. So we're very, very comfortable with the leadership of the firm being in the hands of the 5, in fact, the 5 key senior executives of the firm, which by the way, includes John Valentini, who's with here today, but people should not forget that John is a key member of that executive group.

Yes. No, for sure. Always appreciate your thoughts and comments. And John, I saw that you've added to your platform acquiring the rest of Packaged Living. So can you maybe give us some detail on this? What's the multiple paid for the increased stake? Maybe talk about that asset in particular. And do you have the ability to purchase the rest of that or vice versa? Any option from the minority to kind of sell that at a later date?

Well, the acquisition of Packaged is really a strategy of growth of our European platform. When you see the share of JV earnings, I mean, we call it -- I always discuss with Lucas if we can change the nomenclature of those earnings. What they really are, are performance fees, similar to performance fees and they're joint ventures that we established. There's about 8 platforms that we operate. And those 8 platforms are going to provide a platform for growth for our asset management business in the U.K. and Packaged Living is a good example. It was a platform that specializes in residential housing, which is a growing sector. Actually, if you look at -- there's quite a few articles in the Financial Times that have been published as to how this is emerging to be one of the fastest-growing sectors in the asset management space in the U.K. So we acquired that platform. It operates because it's truly an asset manager. It has mandates with institutional investors. And in actual fact, since we acquired the platform, we've already increased, had new mandates of over CAD 100 million and we expect that to continue over the course of this year. So it's not our intention to acquire more. We've got a controlling interest in the platform. We already had 33%, Gary. And I would say that over the coming years, it could happen that we would -- our operating platforms where we have joint ventures will be another vehicle for continued growth of our European platform. I don't know if I've provided you enough color on that. And just maybe to finish off on private markets, again, we've had new mandates of CAD 500 million in the quarter. We expect that the number will be larger than that in Q2 based on our pipeline, quite confident in new mandates that will be in infrastructure, in real estate and in credit as well over the coming quarters, we expect to get net new capital and new mandates in credit. So we will expect continued growth in AUM over the rest -- in Q2 and the rest of the year.

Okay. No, I appreciate those comments. That's helpful. And then maybe just last question. CAD 5.7 billion Canoe leakage that's behind us and then the CAD 1.2 billion small cap fund. How should we think about redemptions for the remainder of the year? And any other further PineStone leakage expected in the coming quarters?

Well, I think everybody knows that Maxime and I are pretty close. So we talked about that. I think for the rest of the year, you can almost assume that there won't be anything. There might be something, but it's going to be very minimal. It could be CAD 100 million here and there, but nothing significant. And we happen to both believe that the future leakage will be very minimal. And there's a fundamental reason behind that. If you look at the leakage that has occurred up to now, it has been by far. And by far, 90% of it has been from intermediaries. And that's all behind us now. And those clients, we've had very little institutional client leakage. And those clients who had any motivation or intention or desire for whatever reason and from the intermediary side, there's -- I won't go into it, but there's a long list of reasons why they would want to go direct to PineStone. But if other clients who would have had either reasons or motivations or whatever to move directly to PineStone, if they haven't done it by now, it's difficult to see why would they do it in the coming years. So we expect that the future leakage from our Fiera clients going directly to PineStone will be minimal.

Next question will be from Nik Priebe at CIBC Capital Markets.

Okay. Maybe just for Lucas. I would imagine that when you'd engaged in the discussion around the dividend, you would have looked at what run rate, cash flow generative capacity of the business would be. And just considering the recent choppiness that we've seen in equity markets and the chunky redemption of higher-margin assets from Canoe, are you able to just update us on what run rate free cash flow looks like from your perspective today? Like would it be very different from that LTM number?

No. In fact, and as I mentioned in my prepared remarks, you can see an improvement year-over-year, particularly when you look at Q1 of last year. And we do expect it to continue to improve going forward. So I want to be clear that the decision on the dividend was not one in terms of constraint from a free cash flow perspective. And again, we're very comfortable with the resilience of the free cash flow and sort of where it's going and really more one to make sure that we have the financial flexibility, as I mentioned, to take advantage of opportunities that present themselves, but at the same time, weather any downside and protect the balance sheet.

Got it. Okay. And then just in light of the leadership transition, I thought I would ask a strategy-related question. You've always highlighted that the market doesn't give you a lot of recognition for the value of the private markets franchise. I wouldn't think that strategy changes too dramatically with the leadership transition, but is the divestiture of the private markets platform something that you would ever contemplate to surface and crystallize that value?

I'm not sure we'd contemplate divesting something that we think is a future growth engine of the firm. So that would be a categorical no.

Next question will be from Graham Ryding at TD Securities.

Just want to follow-up on the JV earnings piece. What was the size of the incremental investment? Has that been disclosed or would you disclose that? And then what sort of lift should we expect in the JV earnings now that you've got a larger majority stake?

Yes. So it's actually -- it goes the other way. So thanks for the question. So the acquisition cost was roughly CAD 9 million. So that was the additional investment. And you saw that translated into a gain for us of over -- in the books for the year in terms of net income. And it was really related to the fact that we had had a historic investment in there that was from early days that was really quite low value. And so as a result of the way we can account for the acquisition, you've got the gain on sort of the mark-up. Where you'll actually see that revenue coming in now, however, is actually going to be on a consolidated basis. So it's actually coming out of JV earnings. So as a result, for the quarter, we had about CAD 800,000 of revenue that's now embedded in our base management fee as opposed to it coming through the JV revenue line. So what you'll see going forward is effectively disappearing from the JV revenue line and we consolidate 100% of the revenues and expenses. I can tell you sort of the -- this was positive accretion in terms of what comes off of that investment, in particular, is closer to a 40% margin in terms of EBITDA relative to our consolidated amount. I don't know if you wanted to add anything, John?

Yes. A comment I'd make on the JV earnings in actual fact, the amount we've been recording over the last couple of years has been lower than what we've historically realized. We need to understand that the real estate business has been slower due to the macroeconomic environment since '22, '23 that's impacted. But prior to that, our JV earnings were substantially higher than what we've realized over the next 2, 3 years. So I'd expect maybe not so much this year, but starting in '26 onwards, we will see an uptick in our share of earnings as the real estate market in Europe has -- is -- in 2025 is improving significantly over the last couple of years. So while we may lose the Packaged Living share of earnings, I don't expect the share of earnings to go down, in an actual fact, in '26. And '26 onwards, we should see potentially an uptick as we benefit from the increasing activity in real estate activity in that market.

Okay. That's helpful. Lucas, maybe I'll follow-up and just make sure I'm fully understanding the interest. On the private market side, CAD 21 billion in total AUM, how much of that would be within your private wealth channel, your proprietary channel? And then how much opportunity -- and this will be maybe a question for Max or John, but how much opportunity do you see to sort of compete and penetrate into those third-party retail wealth channels? Other banks or independent wealth?

So the private wealth has approximately CAD 3 billion of our assets in the private markets. And as to your second question is, I think one of our best opportunity in terms of underpenetrated market or segment has really been through the intermediaries, the bank, the insurance from an overall platform standpoint. The early touch point is through typically public market platforms where due diligence and others are just easier to execute. But we've seen lots of interest for our private market platform. Hard for me to really give you a number in terms of our ability to get hard data on how much success we could get. But I certainly, from an interest standpoint, we've seen all of them at the table discussing and also seen early wins or finals on the public side of things. We are spending a lot of time introducing the rest of the platform, particularly on the private side of things. And I'm very optimistic that we could see some of the results in the next few quarters on that.

Okay. So it sounds like success on the public market side, you think is going to open the door for potentially some private market mandates in those same channels. Is that the message?

Yes, for sure. I mean, on the public side, I have visibility on what we're about to book and things are potentially to be announced on Q2, Q3. And again, like far advanced discussions on the private market side of things, the cycle is a bit longer. But when I look at the pipeline from where we get RFPs or early discussions all the way to due diligence, it could take a few quarters or a couple of months as they run through the different strategies and make assessments on it. But we're well equipped. Again, when you look at open-ended private market solutions on any of those platforms in Canada, there's very little offering of this quality available. Now it's up to us to make sure we execute on distribution. So we've done that in Canada. We've accelerated distribution and our presence in those segments. And again, if I look at international, I think it's one of the easier underpenetrated segment where we're going to push harder, particularly through the insurance market globally. But you should expect to have more color on it on -- during the Q2.

[Operator Instructions] Next question will be from Jaeme Gloyn at National Bank Financial.

Yes. Just to start with a clarification. The JV earnings, does that shifted to base management fees this quarter or is that a Q2 start?

It shifted this quarter by about just under CAD 300,000. So that was my earlier comment about annualized, it's about CAD 800,000 on the base management fee line. So you'd have about CAD 300,000 in this quarter.

Yes. Got it. Okay. And then just in terms of the, I guess, some of the changes in restructuring and elimination of some folks, did that flow through in this quarter or should we expect to see a step-up in some of those restructuring and other costs in Q2?

No, that will be in Q2. So there wasn't anything that was taken in the first quarter for that.

Okay. And then as I'm thinking about the OpEx line, down this year versus last year on SG&A. Was there anything unique in this quarter or is that just -- what else can we think about in terms of that line? And is this a stable sort of starting point for Fiera going forward or is there more to come through in Q2 in terms of like OpEx savings on SG&A?

I mean, it's stable. You keep in mind that there is a portion of compensation expense that's variable, right? So that fluctuates with AUM and market and revenues. And there's also percentages allocated to bonuses and the like. So as I say, it will -- it's a good run rate at this point, if you will. But I wouldn't factor in much in the way of additional changes.

Right. Got that. Clear. And then last one, just on the expense. The share-based comp came in a little lighter. I believe you guided to kind of plus or minus CAD 5 million a quarter. Is there a shift in how to think about share-based comp going forward?

No, more timing, I would say, this quarter, Jaeme, really just because of some of the changes we announced, some of the implementation of some of those plans got pushed forward. So on an annualized basis, that's still a good number. It's really just more timing at this stage.

Okay, great. And just last one for me. I just want to go back to the capital priorities question and some of your scenarios where you were talking about funded debt ratios. 2.75% would be kind of the goal in a, let's call it, a stress scenario and then 2.25% funded debt ratio would be in a more favorable macro scenario that would allow more aggressive buybacks. Would that 2.25% include those more aggressive buybacks or would you sort of view it as like 2.25% and then more aggressive buybacks would take sort of back up to that 2.75%? Like I'm just wondering the flow of -- the cash flows in those scenarios and where funded debt could end up?

Yes. No, I think that's a fair assessment. The 2.25% doesn't include sort of excess opportunistic opportunities. So as I say, this is more sort of the comfort level for us to manage to. And then you can view the rest as sort of the excess for us to deploy as we see fit at any given point in time.

Yes, okay. So you're not saying 2.25% is where you'll land in a good macro scenario. That's just starting point and then maybe some buybacks taking a little bit higher, maybe some acquisitions taking a bit higher from there, too?

Exactly. I mean, there's -- it will come into the capital allocation mix in terms of things that we're intending to do. So -- but I'd say, it's a good comfort level for us to be able to then take advantage of other opportunities.

Next question is a follow-up from Gary Ho at Desjardins.

Sorry about that. Just a quick question for Lucas. Just the 49% JV that's not owned, I guess, is that booked in your non-controlling interest, because I did see that go down sequentially versus December? Just wondering where I should see the other side of it.

No, you'll see it consolidated at this point. So again, you won't see that. And you'll see sort of the note that describes really the step-up in the acquisition value and the gain on the sale. I'll direct you to that note because there's some good information there just in terms of the economics around the transaction itself.

And at this time, it appears we have no further questions. Please proceed.

Thank you, Sylvie. That concludes today's call. For more information, do not hesitate to take advantage of our website at ir.fieracapital.com, and thank you for joining us today.

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 ask that you please disconnect your lines. Have a good weekend.