Since the first opening of the overseas subsidiary of Bank of China in Luxembourg in 1979, the Grand Duchy has become a gateway to the EU for Chinese financial institutions and more generally has been brought into the sight of Chinese investors as the subsidiary of Bank of China in Luxembourg and the EU hubs of other Chinese banks which have been set up in Luxembourg in a later stage serve China-based investors that wish to invest in Europe.
The overseas subsidiaries of the Chinese banks have also expanded into capital market activities in Europe alongside asset and wealth management, and are actively involved in financing M&A deals which are originated by Chinese investors.
In 2011, the Luxembourg Stock Exchange (LuxSE) listed the first offshore RMB bonds, better known as Dim Sum bonds, issued in Europe. Since then the exchange between China and Luxembourg has experienced rapid growth, which led to fact that when Chinese investors plan to list renminbi (RMB) bonds in continental Europe today, the LuxSE is a natural choice.
Luxembourg is a pre-eminent hub within the EU for financial services activity connected to the Chinese market, and it is well positioned to act as a bridge into the RMB investment pool; as it has been doing for many years.
According to the OECD data, global foreign direct investment (FDI) flows dropped to $846 billion which corresponds to a decrease of 38% in 2020, the lowest level since 2005, as a consequence of the Covid-19 situation. The Covid-19 pandemic also posed several challenges to the economy of Luxembourg. In order to respond to the financial disadvantages caused by the Covid-19, the Luxembourg government established a financial support scheme for the companies which are in temporary financial difficulty, and implicated a series of tax measures to support companies with regards to direct and indirect tax payments. Investments in Luxembourg dropped considerably until mid-2020 alongside a global slowdown due to Brexit and the Covid-19 crisis. Recovery could be observed with a slow, but stable pace in the second half of 2020.
However, domestic constraints on Chinese outbound capital flows and tightening scrutiny of Chinese investments abroad have not helped the recovery of Chinese investment in Europe and Luxembourg after Covid-19 crisis. The lack of a recovery is also likely linked to China’s adherence to a zero-Covid strategy, which hindered cross-border travel and thus deal-making activities.
Regulations of investing
On December 30 2020, the EU and China reached an agreement in principle on the EU-China Comprehensive Agreement on Investment (CAI), which places an emphasis on providing access to the Chinese market for European investors.
Both sides have been continuing separate negotiations on investment protection to be completed within two years of the signature of the agreement, and on March 12 2021 the European Commission published the schedules of commitments agreed under the CAI. Ensuring fair treatment for EU companies in the Chinese market and enabling more cross-border deals between the EU and China, the CAI shall support a better balance in the EU–China trade relationship. The framework is likely to also play a key role in helping the Luxembourg and EU markets to recover.
However, the ratification of the agreement might face problems with the EU sanctions on China enforced in March 2021 over concerns about the human rights situation in Xinjiang and the Chinese counter-sanctions. In addition, Beijing’s imposition of a trade embargo on Lithuania in December 2021 is also likely to weigh on bilateral ties. As a result, the influence of the agreement remains uncertain in 2022.
As regards practical considerations for making investments in Luxembourg, in general no specific pre-approval process for M&A transactions exists but the deals may be subject to a posteriori approval process by the competent Luxembourg authority.
On September 15 2021, a bill (no. 7885) was adopted to implement Regulation (EU) 2019/452 of the European Parliament and of the Council of March 19 2019, introducing a screening mechanism with a mandatory notification and pre-approval requirement for certain foreign direct investments made by non-European investors in a Luxembourg entity operating in a critical sector in the territory of Luxembourg. The bill will affect Chinese investors that wish to invest in a Luxembourg entity conducting activities on the Luxembourg territory regarded as critical in various sectors (e.g. energy, health, defence, finance, telecoms, data and media) by influencing which sectors Chinese investors focus on.
Furthermore, given the importance of the investment fund industry in M&A transactions, the entry into force of EU Regulation 2019/2088 of November 27 2019 on sustainability-related disclosure in the financial services sector and Regulation 2020/852 of June 2020 on the establishment of a framework to facilitate sustainable investment, may indirectly affect the M&A market as well as strategies of Chinese outbound investments.
The implementation of effective environmental, social and governance (ESG) policies and strategies by target companies may attract more green and ESG-standardised investment from Chinese investors. We have already seen that Chinese investment in Europe has become more focused on greenfield projects. In 2021, greenfield investment reached €3.3 billion, the highest recorded value, making up almost a third of all Chinese FDI.
“Luxembourg is a pre-eminent hub within the EU for financial services activity connected to the Chinese market, and it is well positioned to act as a bridge into the RMB investment pool”
On January 20 2022, the Luxembourg Ministry of Economy launched a public consultation on the possible implementation of a merger control regime in Luxembourg, which ended on March 31 2022. The consultation enquires mainly about the design of the notification procedure and the relevant merger control thresholds.
The purpose of such a regime would be to give the Competition Council the power and the tools to carry out an ex-ante control of certain M&A or other alignments between undertakings which may have a restrictive effect on competition in Luxembourg, and to allow for early detection of such threats to competition, potentially limiting damage to consumers and undertakings alike. The Ministry of Economy has working in close collaboration with all affected ministerial departments on this subject, and is expecting to introduce a bill after completion of preparatory works in 2022.
Regardless of the approach ultimately chosen, it appears likely that any future merger control regime will target transactions with a discernible competitive impact in Luxembourg, with the aim of protecting Luxembourg consumers first and foremost. Chinese investors are advised to stay close to such upcoming bill.
As regards the merger clearance process, the Luxembourg law of October 23 2011 on competition designated the Competition Council as the competent authority to scrutinise and analyse mergers and acquisitions taking place in Luxembourg and involving Luxembourg entities. Although it is a post-closing merger clearance process, the Council has indicated its readiness to encourage market participants to run a pre-merger control check where feasible. This possibility therefore exists for investors looking to acquire a Luxembourg-based target.
As for the restrictions on investment, specific rules may apply in certain sectors. For example, in acquisitions in the financial sector (e.g. banks or asset managers), an investor must notify its intention to acquire a certain threshold in a Luxembourg bank or financial sector entity to the regulator, the Commission de Surveillance du Secteur Financier (CSSF).
The CSSF has the right to oppose the transaction based on reasonable grounds and certain legal criteria. Other restrictions apply in certain industries or on acquisitions of companies with securities admitted to trading on a regulated market in Luxembourg where the CSSF, being the competent authority, shall supervise bids impartially and independently of all parties to the bids. The related rules are established by the law of May 19 2006 implementing Directive 2004/25/EU on takeover bids, as amended (also known as the Takeover Law).
Generally, the abovementioned rules apply to Chinese investors and investments, and there are no currency restrictions and no specific contractual provisions arise in relation to Chinese investment.
The most common legal entities used for Chinese investment into Luxembourg are private limited liability companies (i.e. société à responsabilité limitée or SARL) or public limited liability companies (i.e.société anonyme or SA). Both are commonly used as structures for acquisition of companies.
The SARL has a lower minimum share capital and seems to be favoured over the SA. As regards to investment activities by funds established by Chinese investors in Luxembourg, the most common structure seems to be the reserved alternative investment fund (RAIF), and also, to a certain extent, the specialised investment fund (SIF). Both are set up as limited partnerships in the form of société en commandite simple or société en commandite spéciale. In addition, an investment company in risk capital (i.e. société d’investissement en capital à risqué or SICAR) is also commonly used by investors including Chinese investors to pool money for investment.
The key requirement for setting up and using any of these vehicles is the establishment of a certain entity in Luxembourg with sufficient substance. A minimum share capital needs to be provided to the Luxembourg vehicle and management procedures need to be put in place. More specifically, a majority of the management members of the vehicle shall be Luxembourg resident and regular board meetings shall be held in Luxembourg, to ensure decisions are made in Luxembourg.
In establishing investment funds that carry out M&A activities, investors must verify that these comply with the regime of alternative investment fund managers and obtain the applicable approvals from of the CSSF. While RAIFs are not subject to CSSF approval, the SIF and SICAR investment vehicles must be pre-approved by the CSSF before they can begin their business activities.
The most commonly used dispute resolution mechanisms are court litigation and arbitration.
Arbitration is generally favoured by foreign investors because arbitral awards are easier to enforce than court judgments, more flexible and provide more privacy. By 2020, Luxembourg was party to over 100 bilateral investment protection treaties including a treaty with China, the latest version of which entered into force in 2009. Luxembourg’s arbitration courts are used to international agreements, given Luxembourg has been increasingly used as a platform for cross-border investments, joint-venture vehicles and investment funds carrying out M&A activities worldwide.
As regards litigation, Luxembourg courts typically review disputes in a neutral and independent manner within a normal duration of time and issue titles for enforcement useable in Luxembourg and abroad as far as other jurisdictions are covered under respective regulations and treaties.
One of the most important pieces of regulation in this respect is the Recast Brussels Regulation: Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of December 12 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
Another is the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (also known as the Lugano Convention). Local civil procedure code and case law are also of importance.
However, parties in Luxembourg tend to solve their disputes outside arbitration and courts. This is to maintain confidentiality and enable a smooth continuation of business in Luxembourg.
Regarding taxation, Luxembourg benefits from an extended network of double taxation treaties advantageous for FDI into and out of Luxembourg. By applicating the European parent/subsidiary directive, typically no withholding tax applies on dividends. The corporate income tax rate in Luxembourg is 17%. No specific FDI tax incentive schemes are in place, nor are there any specific reciprocal tax arrangements between Luxembourg and China.
On March 21 2020, the Luxembourg parliament passed a law implementing Council Directive (EU) 2018/822 of May 25 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (also known as the DAC6 Law), which entered into force on July 1 2020. It introduces a new obligation for intermediaries to disclose to the Luxembourg tax authorities any cross-border arrangements that meet a hallmark and is expected to also have an impact on cross-border M&A structuring by Chinese investors, as previous method of cross-border M&A tax structuring in terms of the review of the share purchase agreement, tax structuring upon acquisition, cash repatriation strategies upon sale, etc., need to be re-considered for various purposes and in particular transparency.
On October 14 2020, the Minister of Finance of Luxembourg submitted the draft budget law for the year 2021 (Draft Budget Law) to the Luxembourg Parliament, which, among other things, proposes to introduce a 20% withholding tax on income deriving from real estate located in Luxembourg held by certain Luxembourg investment funds directly or through transparent entities or common funds. The Draft Budget Law was adopted by the Luxembourg parliament on December 17 2020 and entered into force on January 1 2021 (for most of the tax measures).
In relation to Covid-19, Luxembourg’s Ministry of Finance announced on March 17 2020 the relaxation of certain tax payment deadlines for companies and self-employed individuals affected by the Covid-19 outbreak. Taxpayers experiencing liquidity problems are entitled to ask for a cancellation of advance tax payments for the first two quarters of 2020. Additionally, the same categories of taxpayer will be given up to four months to pay certain taxes due after February 29 2020, without incurring late payment interest charges. These measures provided more relaxation in terms of cash flows for Chinese investors coming in and having business Luxembourg during the Covid-19 pandemic.
On December 22 2021, the EU Commission issued a draft Council Directive (also known as the ATAD 3) laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU (DAC), which would have to be implemented and applied by member states from January 1 2024.
The ATAD 3 provides a multi-step test to facilitate their identification, and introduces an automatic exchange of information on all in-scope entities by amending Directive 2011/16/EU. It is expected to have an impact on EU corporate taxpayers, including Chinese investors who set up legal entities in EU or Luxembourg that have no or only minimal substance, and that perform no actual economic activity, which poses a risk of being used for improper tax purposes, such as tax evasion and avoidance.
The outlook for Chinese investment into Luxembourg remains fairly optimistic, as we are of the opinion that legal and political stability of Luxembourg’s regulatory and legislative framework, as well as growing fund industry and financial sector, are still the main considerations for Chinese investors to make investment decisions even during pandemics.
However, strict capital controls in China, financial deleveraging and Covid-19 restrictions makes a significant rebound for Chinese investment into Luxembourg in 2022 difficult. The war in Ukraine and expanding screening regimes and scrutiny of Chinese investment in the EU will create additional headwinds, and might slow down the Chinese investment in and through Luxembourg.
The exact impact of the war in Ukraine on China’s investment will depend on the development of the crisis and the stance the Chinese government ends up taking towards the conflict. However, the war has already triggered intense debates on critical infrastructure and resilience in Europe, which could in turn increase scrutiny of Chinese investment in a number of sectors including infrastructure, transport and energy.
Investments focusing on certain sectors, such as consumer goods and infrastructure, are more likely to attract attention and interests from Chinese investors. Nevertheless, environmental, social and governance (ESG) and green investment is going to be a major topic and one big potential growth in terms of opportunities going forward.
Chinese government has been more and more encouraging sustainable investment practices and prioritising ESG factors in overseas investment, since the ‘Belt and Road Initiative’ was incorporated into the Constitution of China in 2017.
A trend where ESG factors and consideration will play an important part in investment decision making is expected, and Chinese investors will need to consider ESG standards in evaluating outbound investment opportunities in Luxembourg and the EU. Chinese investors that are facing ESG disconnect and potential ESG risks for the moment will have to seek alignment with counterparties to solve ESG integration issues by acquiring or merging with ESG-adjacent assets and activities. Expertise in asset management relating to China and strong levels of early movement in green finance marks Luxembourg’s position as a hub for supporting green investment flows from China to Luxembourg.
T: +352 271802 00
Marcus Peter is a partner at GSK Stockmann. He previously worked in a leading independent Luxembourg law firm for 12 years (four years as partner), before opening the Luxembourg office of GSK Stockmann in 2016.
Marcus specialises in investment funds, PE and venture capital as well as corporate and M&A law. He regularly speaks at investment fund events and is also a member of the Cross-Border Business Lawyers Network.
Marcus studied at Rostov-na-Donu State University and Saarland University, and is qualified in both Germany and Luxembourg.
Kate Yu Rao
T: +352 271802 00
Kate Yu Rao is a senior associate at GSK Stockmann in Luxembourg. Prior to joining the firm, she worked for a leading independent Luxembourg law firm.
Kate specialises in matters associated with investment funds, PE activity, corporate and finance. She holds a qualification as a fund manager accredited by the Securities Association of China.
Kate studied at the East China University of Political Science and Law, at the Erasmus University Rotterdam and at Bologna University. She also speaks Chinese and is qualified to practice in China..
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Credit Suisse Nabs Truist's Wolfgram for Tech Investment Banking – BNN
(Bloomberg) — Credit Suisse Group AG hired Rick Wolfgram as a managing director within its technology investment-banking group.
Wolfgram, who’s based in San Francisco, will report to Brian Gudofsky, the Swiss lender’s global head of technology investment banking, according to a memo to staff seen by Bloomberg News. A spokesman confirmed the memo’s contents, declining to comment further.
Wolfgram was most recently a managing director at Truist Financial Corp., where he led internet and digital media investment banking. He’s worked on transactions including initial public offerings for Coursera Inc., DoubleVerify Holdings Inc., NerdWallet Inc., Udemy Inc. and Snap Inc., as well as a high-yield offering for Cars.com Inc., Gudofsky said in his memo. Wolfgram joined Truist in 2012 after working at ThinkEquity.
Earlier this month, David Miller, Credit Suisse’s global head of investment banking and capital markets, said the Zurich-based firm plans to hire roughly 40 managing directors as part of its broader effort to rebuild.
©2022 Bloomberg L.P.
As Markets Tumble, Financial Advisors Rethink Growth Prospects, Finds Natixis Investment Managers 2022 Survey of Financial Professionals
- Canadian financial advisors look for double-digit growth in their business, primarily driven by new assets from new clients.
- Vast majority of client assets are now in model portfolios as focus of wealth management business transitions from portfolio management to holistic financial planning.
- Advisors see generational wealth transfer as crucial to business success, but only one-third prioritize next-generation heirs as new business targets.
BOSTON–(BUSINESS WIRE)–Financial advisors are looking to increase client assets under management (AUM) by 5% (median) this year, and with little of that likely to come from market performance, they are counting primarily on new assets from new clients to grow their business, according to findings from Natixis Investment Managers (IM) 2022 Survey of Financial Professionals, published today.
Natixis IM surveyed 150 financial advisors across Canada, as part of a larger global survey of 2,700 financial professionals. The Canadian findings presented here provide insight about advisors’ growth strategies, the challenges they face, and how they are adapting their business to changes in the market.
Over the next three years, financial advisors are targeting a median annualized growth rate in AUM of 15% and 10 new clients per year. While the long bull market helped turbo charge asset growth over the past ten years, advisors aren’t counting on double-digit returns over the long term. Rather, the survey suggests that advisors are looking to catch a tailwind from the vast amount of money in motion, including rollover retirement assets and the transfer of significant generational wealth. Many may be hard-pressed to hit their targets unless they also adapt their business practices and assumptions.
The survey found:
- Client acquisition is the most difficult way for advisors to go about growing their business. When asked which business growth strategy is most challenging, they were two times more likely to say winning new assets from new clients (45%) than gaining more assets from existing clients (20%). Nearly one in three (29%) say retaining clients is most challenging.
- 65% of advisors say that establishing relationships with clients’ next-generation heirs is the most important factor for the growth of their business, yet 50% say it’s difficult to make progress at it since it takes so much time.
- 59% say that demonstrating their value beyond portfolio construction is one of the most important factors for their success, but 42% say it’s challenging because of the time needed to deliver a broader range of advice and services.
“Advisors have to expand their capacity to grow their business while meeting the needs of new and existing clients,” said David Giunta, President and Chief Executive Officer for the U.S. at Natixis Investment Managers. “Advisory relationships are no longer defined by transactions in an investment portfolio, but rather by a deeper understanding of clients’ financial needs and the services they feel add the most value for the money. Technology and product innovation are helping advisors deliver the consistent investment experience clients expect while supporting the transition of their business to a broader focus on financial planning.”
Modeling the business for new clients
One key way advisors are expanding their capacity on the planning side is by using model portfolios on the investing side. On average, 84% of client assets under management are in model portfolios, including 47% of assets in models that advisors build themselves, 29% in models built and managed by their firm, and 23% from third-party asset managers.
The survey found:
- 83% of financial advisors find that financial planning services are what clients whose assets are in model portfolios value most about the relationship, followed by tax management (60%), financial education and engagement with family members (51%), and trust and estate planning services (50%).
- Among the small percentage (16%) of advisors who don’t use model portfolios, half (54%) say that personally building clients’ investment portfolios is essential to their value proposition.
“The actively-managed, risk-adjusted performance features inherent in model portfolios make them particularly compelling in the current market environment,” said Marina Gross, Co-Head of Natixis Investment Managers Solutions. “Our portfolio consulting practice shows that core moderate-risk model portfolios consistently deliver higher risk-adjusted returns with less volatility than the broad market, enabling advisors to focus more time on long-term goals, than short-term performance.”
The survey found the most effective ways financial advisors are incorporating model portfolios into their practice are by:
- Transitioning assets on a case-by-case basis, depending on each client’s willingness (65%)
- Focusing on new assets from new clients (39%)
- Transitioning client assets in phases, eventually moving the entire client base into model portfolios over time (34%)
About one in three advisors (29%) have found it effective to focus their use of model portfolios on retirement drawdown clients, while one in four (25%) say it was best to take the plunge and move their entire book of business into model portfolios all at once. Few have found it particularly effective to reserve their use of model portfolios for clients who represent less revenue potential, including clients with lower balances (15%) and younger clients (12%).
Prospecting efforts come into focus
In their search for new clients, financial advisors are looking in all the usual places, with most (77%) considering the life stages of their prospects. Almost all advisors (98%) say that pre-retirees, or people between the ages of 50 and 60, are their top priority, while 64% focus on prospects who are at or just entering retirement. Seven in ten (70%) prioritize older accumulators, or people between the ages of 35 and 50 who are in their peak earning years and likely in need of comprehensive financial services to address multiple financial goals such as saving for retirement, funding education, and managing debt.
Given the market environment and generational transfer of wealth underway, advisors may be missing opportunities to reach the oldest and youngest group of potential clients.
- Only 33% of financial advisors are focused on post-retirees, many of who are drawing down versus accumulating assets but who still need robust financial planning and advice to protect, use and pass on their assets.
- 34% place a high priority on prospecting for clients between the ages of 18 and 35, members of Generations Y and Z, who represent the fastest-growing segments of Canada’s population1.
Beyond age segmentation, advisors are tailoring their business offering and business development strategies to appeal to specific high-valued groups. When asked which segments they are prioritizing for client acquisition and retention, the survey found that, again, advisors might be overlooking opportunities to meet the distinct needs of certain segments, namely women and the LGBT+ community. Moreover, relatively few are targeting next-generation heirs despite their importance to the success of their business.
The survey found:
- 83% of advisors are focused on professionals, such as lawyers, doctors, and corporate executives and nearly as many (75%) are targeting business owners
- 75% are focused on HENRYs (High Earners, Not Rich Yet)
- 35% prioritize next-generation heirs
- 29% are concentrating on the needs of women
- 4% are focused on the LGBTQ community
Natixis Investment Manager’s global report on the findings of its 2022 survey of Financial Advisors can be found here.
1 Statistics Canada, Census of Population, 2021, reported in A generational portrait of Canada’s aging population from the 2021 Census, released April 27, 2022.
Natixis Investment Managers surveyed 150 financial advisors across Canada, as part of a larger global survey of 2,700 financial professionals in 16 countries. Data were gathered in March and April 2022 by the research firm CoreData with additional analysis conducted by the Natixis Center for Investor Insights.
About the Natixis Center for Investor Insight
The Natixis Center for Investor Insight is a global research initiative focused on the critical issues shaping today’s investment landscape. The Center examines sentiment and behavior, market outlooks and trends, and risk perceptions of institutional investors, financial professionals and individuals around the world. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.
About Natixis Investment Managers
Natixis Investment Managers’ multi-affiliate approach connects clients to the independent thinking and focused expertise of more than 20 active managers. Ranked among the world’s largest asset managers1 with more than $1.3 trillion assets under management2 (€1.2 trillion), Natixis Investment Managers delivers a diverse range of solutions across asset classes, styles, and vehicles, including innovative environmental, social, and governance (ESG) strategies and products dedicated to advancing sustainable finance. The firm partners with clients in order to understand their unique needs and provide insights and investment solutions tailored to their long-term goals.
Headquartered in Paris and Boston, Natixis Investment Managers is part of the Global Financial Services division of Groupe BPCE, the second-largest banking group in France through the Banque Populaire and Caisse d’Epargne retail networks. Natixis Investment Managers’ affiliated investment management firms include AEW; AlphaSimplex Group; DNCA Investments;3 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions and Natixis Advisors, LLC. Not all offerings are available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.
Natixis Investment Managers’ distribution and service groups include Natixis Distribution, LLC, a limited purpose broker-dealer and the distributor of various U.S. registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.
1 Cerulli Quantitative Update: Global Markets 2021 ranked Natixis Investment Managers as the 15th largest asset manager in the world based on assets under management as of December 31, 2020.entities measured as of March 31, 2022 are $1,320.6 billion (€1,187.6 billion). AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers. 3 A brand of DNCA Finance.2 Assets under management (“AUM”) of current affiliated
This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted.
The data shown represents the opinion of those surveyed, and may change based on market and other conditions. It should not be construed as investment advice.
All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Guardian Capital acquires majority of Ontario investment counselling firm – Investment Executive
The deal announced June 27 also expands the geographic footprint of Guardian’s private wealth segment, which currently has offices in Toronto, Calgary and Vancouver.
Once the deal closes, current Rae & Lipskie management will retain a 40% stake. “All employees are expected to stay,” the Guardian spokesperson said.
Chairman and CEO Ken Rae (who founded the firm as Kenneth Rae Investment Counsel Inc., in 1988) is selling his ownership stake to Guardian “but remaining in a leadership role for the foreseeable future,” the Guardian spokesperson said.
Rae began his career with Canada Permanent Trust in Toronto. In 1968, he moved to Waterloo and worked for Mutual Life and Dominion Life before founding Advantage Investment Counsel in 1985, which he sold.
President and chief operating officer Brian Lipskie (who began his career with Wood Gundy in 1985 before joining Ken Rae in 1989) will retain a “significant” ownership interest and continue to lead the business. A group of senior staff and portfolio managers will also acquire shares in the company.
Rae & Lipskie “is deeply embedded in the Kitchener/Waterloo community, so while the majority of their base is made up of private clients, it also includes foundation and endowments,” the spokesperson said.
Guardian is “always considering such opportunities, and as we learned of this opportunity regarding a business with the strong industry reputation of Rae & Lipskie, we reached out,” the spokesperson added.
“With leaders Brian Lipskie and Ken Rae interested in succession planning, they were highly amenable to the option to secure the future of their businesses by partnering with us.”
The transaction is expected to close in the third quarter.
With files from Melissa Shin
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