Early last year, Jean-Guy Desjardins correctly predicted that Canadian equities were due for a rebound. He’s now saying oil prices will double, taking energy stocks along for the ride.
“The fundamentals of the global supply-demand relationship are favoring higher oil prices,” Desjardins, chief executive officer of Fiera Capital Corp., said in an interview in Toronto on Thursday. “When it goes up it’s going to go up for an extended period of time. I think it can go back to $90, not in six months but over a couple of years.”
That’s way more bullish than most analysts, with the median forecast in a Bloomberg survey calling for $65 crude in 2020 from $45 now. Still, Desjardins believes global central banks will keep some amount of stimulus as their economies recover, boosting demand for crude.
His method to prepare for this outcome is to buy up relatively cheaper Canadian shares. Desjardins last February had called the bottom of the S&P/TSX Composite Index, which met his forecast by rising 18 percent in 2016. This year, however, it has dropped about 1 percent as oil prices languish while the S&P 500 has gained 9 percent.
“You’re better off being overweighted in Canadian equities today than being overweighted U.S. equities,” he said.
Montreal-based Fiera — which had C$122.1 billion ($92 billion) in assets under management as of March 31 making it Canada’s third-largest independent asset manager — is hoping to increase it to C$200 billion by 2020. To get there, Desjardins said the company will need to add about C$25 billion through strategic acquisitions, in addition to organic and market-value growth.
Some 16 potential acquisitions are being considered — 10 in the U.S., four in Canada and two in Europe — targeted at fixed-income managers focusing on emerging markets, U.S. taxable assets and Canadian alternative assets.
Desjardins said his preference is to stick to North America, but he’s open to doing a deal in Europe or Asia if it’s an “exceptional opportunity.” Fiera made its first foray into Europe with last year’s acquisition of London-based Charlemagne Capital Ltd., which specializes in emerging and frontier markets.
Emerging markets are being watched because they’re seen as beneficiaries of the current global economic cycle.
“I think emerging markets are at the beginning of an upward cycle under the impact of a growing global economy,” he said. “I feel pretty good saying two years but I could almost say four years before we possibly go into recession.”