Vancouver wealth manager Harbourfront Group raises funds to boost growth plans

Vancouver-based independent wealth manager Harbourfront Group has secured its first private financing to help boost its growth plans, which include two possible acquisitions this year.

The company, which has approximately $4 billion in assets under administration and $2 billion in assets under management, announced on Tuesday that it had secured funding from Boston-based Audax Private Equity, which values ​​Harbourfront at $425 million.

The company did not disclose how much it got from Audax, but Harbourfront chief executive Danny Popescu told The Globe and Mail it was a “nine-figure” amount that includes a special dividend of approximately $30 million that will go directly to Harbourfront shareholders, who are primarily its investment advisors.

Audax has invested over US$9 billion in more than 150 platforms and 1,100 complementary companies and is currently investing on its sixth US$3.5 billion private equity fund.

The Harbourfront transaction, which is subject to regulatory approval, will see the majority of Audax’s investment split among shareholders, but also “opens the door” for additional funding to be used for larger acquisitions, Ms. Popescu.

The company was launched in 2013 with approximately $10 million in personal funding. Over the next five years, executives hope to reach $15 billion in assets under administration, which Popescu says will give the company a valuation of around $1.5 billion.

Harbourfront was not actively seeking funding, but after Raymond James approached him last August to discuss funding opportunities – ultimately serving as financial adviser for the deal – the wealth manager presented 12 offers from companies of American and Canadian private equity, including Audax.

Harbourfront uses alternative investment strategies with its clients, particularly in private securities, an area that until recently was more accessible to institutional investors, such as pension and endowment funds, than the retail market. .

“While most retail investors compete for the same limited number of public companies listed on global stock exchanges, there are tens of millions of private companies around the world, many of which are also looking to raise capital by issuing shares or by borrowing from investors,” Mr. Popescu said.

“Advisors are realizing in the current environment that to protect client assets they need to diversify beyond the stock market, which is one of the reasons we’re having such great success right now. If you have a good differentiator, then you can use market jitters to offset some of those challenges.

For decades, the wealth management space in Canada has seen a wave of consolidation, especially among smaller investment dealers who have felt the pressure of rising regulatory costs and technology upgrades. of back office. Canada’s big five banks have also beefed up their wealth management divisions, paying top dollar for independent asset managers and financial advisory firms.

But by offering advisers an equity stake in the firm — as well as access to private markets — Popescu hopes to attract high-end advisory teams with a business volume of around $250 million.

He said his company was already in “advanced” talks with two independent brokerages interested in a possible acquisition. Harbourfront currently has 22 branches across the country and 23 advisor teams (with two to three advisors per team). Over the past few years, the brokerage has been actively recruiting advisers from independents and major Canadian banks, but a larger deal would move things along faster.

“Audax’s investment in our business validates Harbourfront’s approach to diversify beyond traditional asset classes – which is much needed in the Canadian space – and a business formula that disrupts the space independent investment dealers in Canada,” said Mr. Popescu.

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