Asset manager Aston Hill looks for a buyer with no deal guaranteed

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Executives at Aston Hill Financial Inc. have been shopping their firm to other asset managers, hoping to find a buyer.

Over the past two months, senior employees at Aston Hill, whose operations are largely split between Calgary and Toronto, have reached out to several Canadian firms and expressed interest in selling their company, according to multiple people familiar with the discussions.

The overtures have been made at a volatile time for the asset manager. Aston Hill recently lost a high-profile mandate to manage $2.2-billion worth of funds for IA Clarington Investments Inc., prompting the company to slash its dividend.

In February, IA Clarington announced it would not renew a contract that allowed Aston Hill to sub-advise three of its funds.

Under the old agreement, Aston Hill chief investment officer Ben Cheng managed three IA Clarington funds: the Tactical Income Fund, the Global Tactical Income Fund and the Tactical Bond Fund. Collectively, these funds had assets that accounted for roughly one-third of Aston Hill's total assets under management, and 16 per cent of revenues.

At the time, Aston Hill downplayed the importance, stressing that executives were focused on growing their in-house products, such as mutual funds and hedge funds. Sub-advisory mandates offer lower profit margins than in-house products, and the company argued that adding to these more profitable areas would be of net benefit to the firm.

However, IA Clarington's decision forced Aston Hill to slash its quarterly payout to 0.005 cents per share, from 0.015 cents. The asset manager described this in a statement as necessary "to maintain an appropriate payout ratio and continue to reinvest in [its] growth."

At the same time, Aston Hill announced it would reduce staff as a cost-cutting measure. Historically the company was known for having a high expense base.

Following these changes, Mr. Cheng embarked on a national roadshow to update advisers on the company's plans for the future, and the assumption was that he would soon launch new funds for retail investors – something Aston Hill had suggested would happen. The company did not disclose that it was looking for potential buyers at the same time. Aston Hill did not return a request for comment.

Although Aston Hill has been looking for a deal, there is no guarantee one will be completed and several firms have rebuffed the executives, according to sources. Two of the best-known names that have been discussed as potential buyers are Dundee Corp., which recently relaunched an asset management business, and Sprott Inc., which has struggled to move past its resource roots.

Dundee declined to comment, but sources say the firm was not interested. Sprott did not return a request for comment.

Aston Hill was formed in 2001 and specialized in the energy sector. The asset manager opened its Toronto office in 2007, which coincided with the hiring of Mr. Cheng, who was previously a portfolio manager at CI Financial Corp. Since 2009, the company went on a buying spree to acquire firms and boost its assets under management.

Aston Hill Financial Inc. (AHF)

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