Publications

- May 1, 2021: Vol. 8, Number 5

Profile: John Valentini, CEO of Fiera Private Alternative Investments, argues that most investors have sorely undervalued real assets

by Mike Consol

During his days at the Big Four accounting firm of Ernst & Young, John Valentini asked his new boss, Jack Schnek, a straightforward question: “What do you expect from me?” To which Valentini received an equally straightforward answer: “Make my life easy. Do your job.”

The reply offered the kind of simplicity and bluntness one imagines Valentini, now CEO of Fiera Private Alternative Investments, embraced and has since advanced to his own executive team at the big Montreal-based asset management firm.

“Good employees want to have challenges; they want to be empowered,” he says. “I am not a micromanager, that is for sure.”

The team appears to have risen to that challenge. Besides building its assets under management to C$14 billion, redemptions during the coronavirus pandemic amounted to a piddling C$5 million. No small feat considering more than 50 percent of that capital is committed to quasi-liquid open-end funds.

“It was ridiculous,” Valentini marvels. “Even I was impressed.”

Fiera Private Alternative Investments is the alternatives/real assets division of C$180 billion Fiera Capital Corp. Depending on risk tolerance, alternatives take a 20 percent to 50 percent share of client portfolios.

“We run a very successful high-net-worth practice,” says Valentini. “Our private-equity solutions mimic the private-equity portfolios of any large institutional investor, so if you want to have access to the private-equity portfolio of the largest Canadian pension funds, we have got it, we have replicated it, we can offer that to smaller investors.”

Minimum investments required to access those strategies run as low as C$10,000.

“People come to us because they’re attracted to our private investment strategies,” he says. “These are strategies that sometimes are not accessible in a retail network of the traditional banks. That really is our differentiator.”

Another mark of distinction is the mid-market focus of the organization and its bias toward open-end fund structures, which lend themselves to small institutional investors and high-net-worth individuals. The open-end structure gives investors easier access to and exits from the fund, meaning investors are not necessarily locking up their capital for multiple years.

WATER, WINE AND ABSTRACTS

Valentini grew up in Montreal, the product of Italian immigrants who came to Canada in the 1950s in search of a new life. His father started a building materials business at which family members worked. Valentini credits the family-owned business as the place where he developed his work ethic.

His parents came to the so-called Great White North from Luciano, Italy, a town near Pescara in the Abruzzo region. Abruzzo, a major pasta-producing region of Italy, counts among its culinary specialties spaghetti alla chitarra, served with a tomato-based sauce, often flavored with peppers, pork, goose or lamb.

It is worth mentioning such gastronomy because Valentini is a man who still feels a connection to his ancestral home and its particular appetites for the epicurean. Though he counts himself a conservative spender, the fruits of his labor he does spend are generously allocated to wine, fine art and waterborne recreation. He recently purchased a Regal Fasdeck 26-foot motorboat to take himself and wife Marisa Giannetti onto waterbodies for sunbathing, waterskiing and wakeboarding.

His art purchases (done for pleasure rather than investment) favor oil paintings, most recently leaning toward abstracts.

“In abstract paintings you see things that aren’t evident,” he explains. “I find it a lot more challenging. A landscape is a landscape, a flowerpot is a flowerpot, and I have got some of these paintings too, and they are very nice. But they do not have the element of creativity that abstract paintings have.”

Wine selections are Italian and French, in staying true to his European heritage.

“I’ve got a bias,” he admits, “I’ve got to keep drinking Italian because I am Italian, so the Tuscan wines are obviously a favored choice for me. But I also like the French wines. I just can’t deny that Bordeaux is very good. I enjoy Bordeaux wines and super Tuscans.”

THE 50/50 PORTFOLIO

In the Valentini household, the man of the house can often be found doing his most productive work from 10 p.m. to 1 a.m., taking advantage of the quiet and isolation after the woman of the house has retired for the evening. No people coming by, no ringing phones, no distractions and a steady focus on the task at hand.

Valentini considers stocking a portfolio with private assets (“privates,” as he calls them for short) is an obvious alternative to poorly performing interest-rate-sensitive instruments.

“I cannot understand why somebody, or even an institutional investor, would not diversify their fixed-income allocations in a very significant way to real assets,” he comments. “They provide yield, return, less volatility, and they’re uncorrelated. They have got so many benefits, particularly for the long-term investor.”

Then there are the frothy public markets, whose pricey equities make the move into privates especially opportune. At this stage, Valentini especially likes investments in agriculture, credit, infrastructure and real estate for high-net-worth individuals.

“I don’t believe a person should have all their money in privates; I think the public-equity markets offer their benefits as well,” he says. “My exposure between liquids and illiquids in my personal portfolio is probably 50/50.”

SPEAK THE LANGUAGE

Valentini treated his years of higher education like a smart investor would treat a well-constructed portfolio by emphasizing “diverse exposures.” Accounting was a core educational investment, as was his career start at the Big Four accounting firms of Ernst & Young and PricewaterhouseCoopers, which he considers an ideal place to learn the language of business.

“Accounting is numerical and that adds a core competency at business. It is the language of business, just as we speak English, Italian or French” — all of which, by the way, Valentini speaks fluently.

After starting his accounting career as an auditor, he eventually was assigned to mergers and acquisitions work, before becoming CFO at a couple of public companies. He then joined PSP Investments, a major Ottawa-based pension fund that invests on behalf of the Public Service, the Canadian Armed Forces, the Royal Canadian Mounted Police and the Reserve Force. Currently its global portfolio has financial commitments in more than 100 industries and 85 countries. Valentini joined the organization while it was managing overall assets of about $15 billion. When he departed 11 years later, its assets under management had swelled to about $120 billion, and today stand at about $180 billion. Some $45 billion of that figure was private alternatives, up from only $1 billion when Valentini took the helm of that aspect of the company’s operations.

WATCH WHERE YOU SIT

Valentini was attending a CFA Institute dinner in 2015 when he was fortuitously seated next to Fiera Capital CEO Jean-Guy Desjardins, who was being honored that evening with the Award for Professional Excellence, the highest and most prestigious distinction bestowed by the CFA Institute. The dinner conversation must have been astute because Valentini received a call from Desjardins the next day and was offered the organization’s CFO post. It was an offer Valentini accepted, and it proved opportune. The company had started a private-market business and was looking for leadership to take it to a higher level. Valentini raised his hand and told Desjardins he was the guy for the task.

“Basically, it was an opportunity that I wasn’t going to pass on, and that is when we started proactively building out the platform,” he recounts.

A DECADE IN POLITICS

Valentini moves from situation to situation seeking to assert control, rather than being controlled by circumstances. This is in keeping with his belief that a person’s true mettle is tested in times of turbulence and challenge, the very situations during which Valentini believes he does his best work. A person’s focus is prone to wavering during times of smooth sailing, he says.

It is that determination to control situations and rise to challenges that Valentini considers the characteristic most responsible for the professional milestones he has achieved.

He has applied that determination to the political sector, as well, and to good effect, running for and winning a seat as a Montreal city alderman. He occupied that seat for 10 years before running out of enthusiasm for elected office.

“It is a different environment. I found I was quite successful at it, but I left because I much prefer the corporate business environment. I will put it to you this way: From the outside, it looks a lot more glamourous than it is.”

THE ROAD AHEAD

About 75 percent of the growth experienced by the Fiera alternatives division has been organic, by Valentini’s estimation, and he expects that to continue being the case going forward. The organization is poised for that, he says, having built a set of competitive teams and strategies over the past several years.

“We are 95 percent of the way there,” he says. “Now it’s really about selling our strategies and attracting investors into our platform.”

The remaining 25 percent of the Fiera growth equation will come from selective acquisitions, which isn’t so much about bringing clients and AUM under its banner as much as procuring talent.

“That is basically what we’re buying, a talented investment team.”

Acquisition targets are typically smaller in scale, in part because asset managers in the alternatives space have become very expensive and because Valentini’s executive team is already adept at organically expanding the business.

Client and asset growth will naturally require an expanded staff, as well, and Valentini favors professionals with a diverse background of experiences and an entrepreneurial bent.

“I focus on personal competencies much more than the sectorial experience that a person brings to the table,” he says.

Beyond that, Valentini says “you really need to enjoy what you are doing, and it has got to be financially rewarding. If we can address those two issues, that is how you keep an investment team motivated and performing.”

In effect, Valentini might say, “do your job.”

 

Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.

 

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