From revolution to evolution

Given the simplicity and power of modern portfolio theory, it’s no surprise that the concept has become a fixture in conversations across today’s investment industry. But like most conventional wisdom, it started out as a radical concept – and Jean-Guy Desjardins was there for it.

“I was at university doing what would be the equivalent of a master’s degree in the French system,” says the founder of Fiera Capital. “I was taking courses on investment management and learning about modern portfolio theory and the research that was going on at the University of Chicago … I was fascinated by the science, which was at its very beginning in those days.”

At that point, Desjardins was already quite interested in the prospect of a career in the investment business. To get his start, he landed a part-time job as a junior analyst at a small mutual fund company in Montreal during his last two years at university. He worked 15 hours a week doing basic stock research, while at school he was learning about new investment management frontiers that were in the initial stages of exploration.

“I think that large institutions were just starting to pay attention to the science, but not very seriously,” he says. “I saw an opportunity to move into an industry where the traditional way of doing things would be significantly challenged and there was no limit to creativity and the flexibility to implement change.”

Blazing new trails

In 1972, not long after graduating, Desjardins became a partner in a young company called TAL Global Asset Management. Four years later, he became its president, as well as a shareholder in the company.

His ambition for TAL – to create an organization that would make extensive use of quantitative techniques in managing investment portfolios – was clearly informed by his immersion in leading-edge academic research. He also wanted to shine a light on the importance of portfolio management in contrast to stock selection, which was the prevalent approach at that time.

“You could say selecting securities is the traditional Graham and Dodd type approach of basic financial analysis, which I would call the more micro aspect of portfolio management,” Desjardins says. “With a full portfolio management approach, you’re also considering the economic environment, macro-economic forecasting, and using probabilities and optimization techniques.”

Even that early in the game, Desjardins says asset allocation decisions – including the selection of both stocks and bonds – accounted for a large percentage of the rate of return generated by a portfolio. But as clear as that may be to today’s investment professionals, very few people in the industry back then were connected to that reality. That gave TAL an opening to combine the right talent, technology and other resources into a valuable edge that would serve it well as the industry became more competitive.

“Another revolution that took place in the early ’70s was the advent of relative performance measurement,” Desjardins recalls. “Before, investment firms were evaluated based on their performance relative to the market [indices]. But then the industry started evaluating investment companies based on performance management surveys that positioned them relative to all their competitors, and that became a powerful marketing tool for companies like ours. It shook the industry.”

TAL maintained its position as an industry leader until 2001, when it was acquired by a Big Six bank. Professionally speaking, Desjardins says, selling wasn’t something the leadership team really wanted to do. But because most of the company’s roughly 100 shareholders wanted to take the opportunity to become financially independent, TAL’s leaders decided to respect their interests.

“The day after we sold the business, I told my wife and my closest friends that if the opportunity came up, I would buy an existing investment management company,” Desjardins says. “That opportunity came  up in 2003, and that’s how Fiera Capital  got going.”

The next step

Continuing what he and his colleagues had started at TAL, Desjardins sought to develop Fiera Capital into a global investment management organization with a disciplined and organized quantitative ethos. He also recognized another chance to get ahead of the curve by investing in private-market strategies, including alternative credit, real estate, infrastructure and more.

“It was a significant evolution in the money management business, where the opportunity to invest in and create these new strategies allows us to do a much, much better job for the clients,” he says.

Today, Fiera Capital has grown into a global asset manager with a solid record of long-term performance and a shelf of 110 different investment options across its institutional and retail businesses. Even as Desjardins takes a step back from running the company – as part of a multi-year succession plan, his protégé, Jean-Philippe Lemay, was recently named global president and CEO – he sees it playing an even bigger role in the next 10 years.

“We want to be the most efficient capital allocator we can possibly be,” says Desjardins, who is now the executive chairman of Fiera Capital’s board of directors. “That means going beyond generating competitive, risk-optimized rates of return for our clients – though that’s our number-one objective –but also ensuring that we’re being efficient from an environmental point of view, from a diversity point of view and from a social point of view.”

Given the extent of his contributions, no one would blame Desjardins if he were to leave the industry now. But as fertile as his imagination is, he still can’t envision himself walking away from the work he began.

“I think when you stop dreaming, you’re dead, so I want to dream as long as I can,” he says. “As long as I’m able to dream about the future of this organization and its place in the industry and the economy, and communicate that dream to people who will buy into it and can make it a reality, I want to keep doing that.”