Power Corp.'s Sagard Holdings buys majority stake in wealth manager Grayhawk

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Power Corp.'s alternative-asset management arm, Sagard Holdings, is adding to its financial services portfolio with the purchase of a majority stake in Alberta-based high-net-worth wealth manager Grayhawk Investment Strategies Inc.

On Tuesday, Sagard will announce it is acquiring an undisclosed majority holding in Grayhawk Investments, a portfolio management company with about $800-million in assets under management that serves high- and ultrahigh-net-worth households across Canada.

Ultrahigh-net-worth accounts typically have more than $30-million in investable assets and can include multiple generations of family wealth. Sagard’s chief executive Paul Desmarais III told The Globe and Mail he particularly wants to target middle market entrepreneurs – business owners with less than $1-billion in investable assets – through the partnership with Grayhawk.

“Through our engagement with a lot of wealthy families across the country, we recognized a real gap in how these ultrahigh-net-worth families are being serviced – many of whom are family businesses,” Mr. Desmarais said. “I’m a strong believer that there is significant potential for growth [among middle market entrepreneurs] and a new approach in the family office services space.”

That approach involves offering investing opportunities to clients that do not include proprietary products – and access to alternative assets such as private equity or pharmaceuticals that traditional banks typically do not offer, Mr. Desmarais said.

Servicing Canada’s richest people remains a competitive landscape for independent wealth managers, but the competition is starting to get smaller. There are 157 independent brokerage firms in Canada, according to the Investment Industry Association of Canada. That’s down from just more than 200 firms that were operating five years ago.

Sagard’s investment in a multigenerational portfolio manager coincides with the largest intergenerational wealth transfer to happen among Canadians to date. Approximately $1-trillion will have passed from one generation to the next in Canada between 2016 and 2026, according to data from ISS Market Intelligence.

Also known as family offices, boutique investment managers first caught the attention of Mr. Desmarais while he was travelling within Europe in 2019. “They have a private banking system that I kept thinking, why don’t we have something like that here in Canada? Part of me decided [on that trip] that it was a service we had to launch for Canadian families.”

There are about 9,325 families in Canada with $30-million in assets – including primary residences – according to a 2020 global wealth report by Knight Frank, a British-based consultancy group.

Grayhawk’s founder and co-CEO Michael Kaumeyer says he wants to add 500 of those families as clients over the next 10 years.

With offices in Calgary and Toronto, Grayhawk serves 30 of Canada’s richest families – many of which include multiple generations of family wealth. The company provides financial planning, including complex tax and estate services, but Mr. Kaumeyer says he wants to expand the company to become a “pan-Canadian family office” that would co-ordinate all the financial needs of a wealthy family, particularly in assisting with intergenerational wealth transfers.

Already, he has begun to hire in Montreal and Vancouver, with longer-term plans to add an East Coast office in about two years. Earlier this year, former Gluskin Sheff executive Peter Mann joined Grayhawk as co-CEO, bringing his institutional and endowment investment expertise to the company. Both Mr. Mann and Mr. Kaumeyer will remain as co-CEOs of Grayhawk.

“Sagard represents one of the most important and respected financial networks in the world," said Mr. Kaumeyer. “[Sagard’s] long-term capital commitment will allow us to leverage Sagard’s Canadian and global network and offer more services that matter most to families.”

With $3.6-billion in assets, Sagard manages a broad list of alternative investments for Grayhawk clients to tap into. The company has six funds that invest in venture capital, private equity, private credit such as middle-market lending, and health care royalties from drugs, medical devices and diagnostics.

Typically, private alternative assets have been a segment wealthy Canadians have not been able to easily access, Mr. Desmarais said.

“Ultimately, if you look at the banks, they do not have huge product diversity on their shelves,” he added. “If a client wants to get access to private credit, then we can go find five to 10 of the best credit managers that are differentiated and offer it to a client in a way they just don’t have access to today."

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