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Feb 14, 2018

Jarislowsky president: Scotiabank deal will 'take us to the next level'

Scotiabank to buy investment firm Jarislowsky Fraser in $950M deal

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Jarislowsky Fraser Ltd., the Canadian manager of about $40 billion being bought by Bank of Nova Scotia (BNS.TO), expects the deal to propel its private wealth services into new regions of the globe with more funds, assets and clients.

“This is going to take us to the next level,” President Pierre Lapointe said in an interview, adding that Scotiabank plans to keep the Montreal-based investment firm independently run. “Scotiabank has great distribution. They also have deep pockets to invest and launch new products which we might be hesitant to do, certainly in alternative products.”

Scotiabank on Monday agreed to pay about $950 millionfor Jarislowsky Fraser, adding more than $40 billion in assets under management on behalf of institutional investors and high net worth clients.

Founded by Berlin-born Stephen Jarislowsky in 1955, the firm made a name for itself over the years by conducting extensive field research on Canadian companies and developing statistical tools to find and value investments. Jarislowsky’s age -- he is now 92, and gave up executive duties about five years ago to remain a director -- was a factor in the decision to sell, Lapointe said.

“We were in a phase of introspection,” Lapointe said. “Given his age, Mr. Jarislowsky has been wondering about the future of the firm. Meanwhile Scotia was looking for portfolio managers. You could say the stars aligned.”

Scotiabank won't be able to muzzle Stephen Jarislowsky: McGill professor

BNN speaks with Karl Moore, professor of business strategy at McGill University. He talks about what Scotiabank's takeout of Jarislowsky Fraser will mean for both brands and management teams.

Long Relationship

While the deal was consummated after “several months” of talks, Lapointe said both parties have done business together for years. Jarislowsky already manages some broker accounts for a Scotiabank unit, said Quyn Pham, a spokeswoman for the Montreal-based firm.

“They really want to make Jarislowsky Fraser one of the showpieces of their private wealth” business, Lapointe said of Scotiabank. “Even though we’re an affiliate, and we’re owned by the bank, they do want to leave us independently run and make sure the proprietary research and the performance is that of Jarislowsky. When you’re paying that kind of money, you don’t want to mess around with the investment style. So we view them as a good partner.”

Jarislowsky’s approach revolves around a “bottom-up, very conservative philosophy that’s stood the test of time,” Lapointe said. “It’s cash flow-driven. We do our research, visiting, getting to know management well. The proof is in the pudding. There’s a reason why we never bought other firms.”

Banking Stocks

Three of Jarislowsky Fraser’s five biggest U.S.-listed holdings are Canadian bank stocks, data compiled by Bloomberg show. The stakes in Toronto-Dominion Bank, Royal Bank of Canada and Scotiabank have a combined market value of about $3.8 billion. The firm also holds large stakes in Calgary-based energy producers such as Enbridge Inc. and Canadian Natural Resources Ltd., as well as Canadian National Railway Co., the country’s biggest railroad.

The way Lapointe sees it, Scotiabank’s global reach will allow Jarislowsky to expand its client base -- both at home and beyond Canada’s borders. With operations in more than 50 countries, Scotiabank is Canada’s most international lender.

“We get better distribution locally, and they can bring us international clients, which we don’t have,” he said. “Then we can sell our products like emerging markets, our global equity products, our U.S. products, to the international channels. To the extent that Scotiabank can include us as international managers on their platform, it’s a win for both sides: it gets us new clients and new markets.”