Fiera Capital Limits Redemptions on $1.1 Billion Credit Fund

(Bloomberg) -- One of Canada's biggest money managers is restricting redemptions in a large debt fund and warning that some borrowers may miss interest payments.

Fiera Capital Corp. has called investors to inform them it could only fulfill a little more than 20% of redemption requests in its Diversified Lending Fund, which has about C$1.5 billion ($1.1 billion) under management, according to people familiar with the situation. The fund is managed by chief investment officer Francois Bourdon and two others.

The fund invests in the residential and commercial construction sector through limited partnerships (LPs) with various partners that specialize in lending solutions. The fund also puts money into partnerships that offer private loans to companies and other types of loans.

Nearly 64% of the fund's loans are for housing projects, as of the end of February; 91% are in Canada or the U.S.

“The Diversified Lending strategy has been progressively positioned for a cycle that was getting longer in the tooth, but not for a recession,” the company said in a fund document on its website. “The social distancing measures will have a negative impact on certain borrowers in the strategy; interest payments may be postponed and depending on the length of the measures, more workouts than expected may occur.”

The fund was created in 2008 and has generated net annualized returns of 6.55% since inception, according to the company's website. This year the fund was up 1.69% in the first quarter.

The firm is telling clients the fund is well-diversified and could use its liquidity sources to satisfy investors in a fair manner, said one person who spoke on condition they not be named.

A Fiera Capital spokesperson declined to comment.

Montreal-based Fiera, which has 750 employees in North America and Europe, managed C$170 billion at the end of 2019. Its largest revenue line comes from handling institutional money. About 45% of its assets under management are in fixed income.

Many funds are facing redemption demands. Ken Griffin's Citadel will allow investors to pull a total of $1 billion from its main hedge funds without incurring fees or penalties, a sign that clients are grappling with the economic fallout from the pandemic. The move, an exception from the firm's usual practice, is aimed at providing relief to those invested in Citadel's flagship Wellington and Kensington funds, according to an investor letter seen by Bloomberg.

‘Pandemic Effects'

The coronavirus pandemic is buffeting Canada's alternative lenders. Last month, Bridging Finance Inc. said in an letter to investors that it had gated its funds indefinitely “to maintain investor value and limit pandemic effects.” The non-bank lender has C$1.6 billion in assets under management. Most of its direct lending funds are invested in collateral-based bridge loans, inventory and accounts-receivables financing.

Canadian non-bank commercial mortgage lenders also froze redemptions as the underlying assets couldn't be sold fast enough to keep pace with sustained withdrawals, Bloomberg reported in March.

Vancouver-based Trez Capital gated approximately C$2.6 billion. It didn't say how long the freeze would last to “avoid building unrealistic expectations”.

Some firms such as Morrison Laurier Mortgage Corp. have gone further and also suspended dividends and new purchases last month, according to sources.