Sagard Holdings Inc. is buying a stake in Connecticut-based private equity firm Performance Equity Management, paving the way for it to acquire the business outright in five years, as the Montreal-based alternative asset manager branches out into new investment strategies.
Sagard currently manages a US$15-billion portfolio, with investments spread across private equity and credit, venture capital, real estate and health care royalties. By partnering with PEM, which manages US$8.9-billion of assets, Sagard plans to give its clients access to new types of investments through a broader array of asset managers.
The size of Sagard’s stake in PEM was not disclosed, nor was the purchase price, but the agreement gives Sagard a chance to acquire PEM’s remaining shares at the end of 2028. In the meantime, PEM’s senior management will stay on to run the business, and will retain full control over investment activities.
Sagard, which is a subsidiary of Power Corp. of Canada and is controlled by the Desmarais family, has been ramping up its expansion plans. Earlier this year, it brought on Abu Dhabi-based sovereign wealth fund ADQ and Bank of Montreal as equity partners, selling minority stakes in its business to raise funds for an expansion plan that includes launching new investing strategies and making acquisitions.
The partnership with PEM is a first significant step in that direction. Buying a stake in PEM “will enable Sagard to accelerate the development of its product offering to retail networks, wealth management firms, and family offices,” Paul Desmarais III, chairman and chief executive officer of Sagard, said in a statement.
PEM focuses mostly on transactions at the smaller end of the market – such as small- and mid-market buyouts, venture capital and growth equity investments. And it is established in investing strategies where Sagard wants a beachhead, such as fund-of-funds investing – pools of capital raised to buy stakes in other private equity funds – as well as in co-investments and the secondaries market, where investors buy and sell fund stakes at discounts.
PEM has committed US$29-billion to private equity strategies since it was founded in 2005. But its assets under management have fallen by about 10 per cent since the end of 2022, when they stood at US$9.9-billion, amid volatile markets.
James Bradshaw