CA - Fiera Capital Corporation (FRRPF) CEO Jean-Philippe Lemay on Q2 2022 Results - Earnings Call Transcript
Fiera Capital Corporation (FRRPF)
Q2 2022 Earnings Conference Call
August 11, 2022 10:00 ET
Company Participants
Marie-France Guay - Senior Vice President, Treasury and Investor Relations
Jean-Philippe Lemay - Global President and Chief Executive Officer
Lucas Pontillo - Executive Vice President and Global Chief Financial Officer
Conference Call Participants
Gary Ho - Desjardins
Jaeme Gloyn - National Bank
Graham Ryding - TD Securities
Presentation
Operator
Good morning. My name is Diana and I will be your conference operator today. At this time, I would like to welcome everyone to Fiera Capital’s Earnings Call to discuss Financial Results for the Second Quarter of 2022. [Operator Instructions] Thank you. I will now turn over the conference to Ms. Marie-France Guay, Senior Vice President, Treasury and Investor Relations. Ms. Guay, you may begin your conference.
Marie-France Guay
Thank you. Good morning, everyone. [Foreign Language] Welcome to the Fiera Capital conference call to discuss our financial results for the second quarter of 2022.
Before we begin, I invite you to download a copy of today’s presentation, which can be found in the Investor Relations section of our website, at ir.fieracapital.com. Note that today’s call will be held in English. Also note that comments made on today’s call, including replies to certain questions, may deal with forward-looking statements which are subject to risks and uncertainties that may cause actual results to differ from our expectations. I would ask you to take a moment to read the forward-looking statements on Page 2 of the presentation.
Our speakers today are Mr. Jean-Philippe Lemay, Global President and Chief Executive Officer; and Mr. Lucas Pontillo, Executive Vice President and Global Chief Financial Officer. On today’s call, we will discuss our Q2 2022 results, starting with an update on our AUM flows as well as on our distribution and investment performance. We will then review our financial performance. Following prepared remarks, we will take your questions.
With that, I will now turn the call over to Jean-Philippe.
Jean-Philippe Lemay
Thank you, Marie-France. Good morning, everyone and thank you for joining us. The beginning of 2022 has been a challenging operating environment for asset managers, and the confluence of factors affecting equity and fixed income asset prices experienced in the first quarter of 2022 continued in the second quarter; notably, historically high inflation and the resulting aggressive monetary policy actions by central banks across the globe to stem the recessionary risk and this following an outstanding performance in worldwide equity markets in 2021. This had a knock-on impact on investor behavior, as asset owners reduced equity and fixed income exposures this quarter. The impact of these forces has resulted in a 10.2% decline in our assets under management, or an 8.8% decline excluding strategic outflows in Q2 ‘22.
Despite the decline in AUM, revenues, including dispositions, in the second quarter were essentially flat to the second quarter of ‘21, driven by an increasing share of income from higher and more diversified fee-generating private markets AUM. The results of our efforts to expand the depth and diversity of our investment strategies can be seen through consistent growth in our private markets platform. We believe the current macro conditions are all the more conducive for Fiera to experience continued growth in our real assets and private credit platforms as investors seek alternatives for sustainable income and capital appreciation opportunities given the rather challenging recessionary outlook for equity and bond market returns.
In terms of our financial performance for the second quarter, we saw adjusted EBITDA of $46.4 million, compared to $47.3 million in Q1 ‘21. Our adjusted EBITDA margin for Q2 ‘22 was 28.3%, up from 27.5% in Q1 ‘22 and our last 12-month adjusted EBITDA margin continues to trend above 30%, coming in at 32%. Adjusted EPS for the quarter was $0.31 and we are pleased that our last 12-months adjusted EPS has increased by 5% from Q2 ‘21, to $1.66. Our aim to efficiently allocate capital to increase innovative investment solutions enabled us to demonstrate resiliency to the headwinds experienced in the first half of ‘22. I will bring this to light as I take you through the highlights of the quarter.
Assets under management were $156.7 billion as of June 30, a decrease of $22.8 billion, or 12.7%, over the last 12 months. Excluding strategic outflows, the year-on-year change was $20 billion, or 11.3%. When compared to AUM for the first quarter of ‘22, we saw a reduction of $15.2 million, or 8.8%, excluding strategic outflows related to the termination of the Bel Air sub-advisory relationship.
Following the sale of this business in February 2021, Fiera continued to sub-advise a portion of assets for Bel Air on a model-traded basis. Fiera has now fully transitioned out of this arrangement. And although this resulted in a $2.6 billion decrease in AUM, the model-traded nature of the arrangement meant that these assets had a dilutive contribution to margin.
The remaining decrease in AUM is entirely attributable to our public market strategies and is driven by adverse market returns given the volatile quarter in both equity and fixed income markets. The current market backdrop is triggering significant asset allocation decisions away from equities, which mainly drove the year-to-date negative net contributions of $4 billion in public markets. However, across both investment platforms year-to-date, new mandates of $3.5 billion significantly outpaced lost mandates of $1.7 billion across all distribution channels and client geographies. We saw continued growth in AUM flows in private markets, with a year-on-year growth of 22.1%. We returned $800 million to our clients through capital and income distributions, while raising $3.1 billion in new subscriptions over the same period.
I will now turn to our distribution performance for the second quarter. The impact that the challenging market environment has had on investor behavior can be characterized as a tale of 2 quarters, both of which have negatively impacted net contribution activity within our flows. Q1 ‘22, investor behavior was dominated by profit taking, as investors crystallized accumulated gains from exceptional equity market performance in ‘21.
For Q2 ‘22, a risk-off sentiment in the face of a rapidly rising inflationary pressure and the risk of recession saw investors reducing equity and fixed income exposures to shelter from the market volatility amid a broad market sell-off in Q2. This accounted for the headwinds in net contributions and a resulting drag on net organic revenue growth for the first half of the year. On the gross revenue sales side, we expect to generate approximately $25 million of annualized base management fees off new mandates of $3.5 billion in the first half of ‘22, representing 7.8% growth relative to base management fees on an annualized basis.
Our unique private market strategies accessed directly by new limited partners or through our multi-asset solutions offering were the catalyst for growth in new mandates this year, which represented $18 million of the $25 million of annualized base management fees year-to-date. Our ability to leverage the strength of our private market expertise into multi-asset mandates for our clients has been a key differentiator for Fiera, as it provides us with the capacity to deliver tailored income and capital appreciation solutions. We have been able to do this across our diverse client base, particularly for our private wealth clients who are benefiting from an institutional-grade investment process.
The negative net contributions in the quarter were particularly affected by specialized equity mandates. As such, our continued focus on multi-asset client relationships remains a strategic priority and has helped us to diversify our flow exposure. This strategy has gained traction in the second quarter, as highlighted by our distribution performance across our channels. In Canada, while the dynamics of investor behavior mentioned earlier were felt broadly across channels through negative net contributions, our diversified capabilities offering produced new mandates through client relationships. Gross new sales in the institutional channel were $700 million, coming from real estate and multi-asset mandates.
Additionally, within the institutional channel we saw $1 billion in year-to-date net organic growth from our LDI mandates. The competitiveness of our LDI offering differentiates us and, as a standout example, makes us a sought-after partner to insurance companies active in pension risk transfer activities. We also saw further traction from two of our longstanding financial intermediaries partnerships into equities and private corporate equity and debt. Of particular note is the strong performance of our private wealth distribution channel in Canada, which generated $500 million of positive net organic growth year-to-date, translating to 10.4% base management fee growth relative to its 2021 base management fee run rate.
In the U.S., our client mandates tends to be more specialized, which resulted in net outflows brought on by investors reducing their equity positions in response to market conditions. The growth in our U.S. fixed income mandates came from the recent increase in yields and the relative attractiveness of municipal bonds. And given our longstanding and consistent risk-managed investment approach, our fixed income team generated net organic growth of $400 million into our U.S. tax-efficient and taxable fixed income strategies.
In Europe and Asia, gross inflows of $300 million were driven by institutional and financial intermediaries wins, as our Atlas Global Equity team continues to build momentum with our first major pension fund mandate won in Europe. Additionally, we secured investments from two new UK-based intermediaries in the quarter. In private markets, we had approximately $260 million of gross new flows in institutional, driven by commitments made as part of the first close on the new Fiera Real Estate Logistics Development Fund in the UK. We did, however, observe similar behavior to that of the U.S. across our specialized mandates in Europe and Asia, which contributed to overall negative net contribution in the region for the quarter.
I will now discuss our investment performance for the second quarter, starting with our private markets platform. We continued to deliver strong performance in the second quarter, with positive returns in the majority of our direct private strategies demonstrating their resiliency in the face of a difficult macro environment. The returns on a few of our strategies were impacted by the rising interest rate environment; namely, our infrastructure and private debt funds. These are comprised of longer-duration loans and, hence, were impacted by mark-to-market adjustments from the underlying increase in interest rates. In each case, investments are predominantly in senior secured instruments with defensive characteristics and maintain a robust long-term performance track record.
The standout performance in the quarter among our private market strategies include the Fiera Real Estate Small Cap Industrial Fund, with an absolute return of 8.4% and the Fiera Real Estate CORE Fund, an absolute return of 5.2%. We deployed $500 million into new investments across our strategies, have accumulated $1.9 billion of committed and undeployed capital, and we have a strong pipeline of investment opportunities globally, with a focus on downside protection. Year-over-year, we are very pleased with our AUM increase of $3.1 billion. Over the last 3 years, our real estate platform has enjoyed the largest growth in absolute dollars, at $2.3 billion, and our infrastructure and agriculture platforms have grown at a 3-year CAGR of 30% and 47%, respectively.
Moving on to our public equity platform. Although equity returns saw a sharp downturn in the second quarter, with large U.S. and Canadian indices showing an average negative 13% return, we are pleased with the results generated from our active management decisions, which saw a strong rebound after a challenging Q1, style-wise. In particular, the Global Equity and the Atlas Global Equity strategies both experienced a significant turnaround in relative performance trends in the quarter.
As for our Canadian Equity strategy, it maintains its track record of outperformance, having generated a significant positive alpha of 6.25% just for this quarter. This turnaround in recent performance demonstrates the conviction of our public markets investment teams in the robustness of their investment process and active management value-add, which has proven to be successful over the long-term. Over both a 3 and 5-year time horizon, 97% of our equity strategies are beating their benchmark at the end of Q2.
Moving to our public fixed income platform, as highlighted last quarter, our fixed income asset base is characterized by a combination of various maturity mandates, which again explains the decrease in our fixed income AUM given the continued upward trajectory in rates.
Turning now to relative performance of our strategies in the quarter, our Core active fixed income strategies were challenged by the continued hawkish stance of central banks to curb inflationary pressures, while our Credit Oriented strategy was resilient in the face of deteriorating credit spreads. However, our fixed income Tax Efficient Core and High Grade Core Intermediate strategies outperformed due to short-duration positioning and higher credit quality. In line with our equity strategies, the long-term historical performance of our fixed income platform remains strong, with 87% and 92% of our strategies beating their benchmark over 3 and 5 years, respectively, at the end of Q2.
Finally, our tactical asset allocation team, maintained throughout the quarter their position underweight equity, exposure to shorter duration fixed income and strategically support our long-term private markets allocation, which contributed to maintain our strong relative performance over the long term.
With that, I will turn it over to Lucas for a review of our financial performance.
Lucas Pontillo
Thank you everyone. Good morning, JP. The resilience in our diversified revenue streams across asset classes and distribution channels were evident in the difficult market conditions that prevailed in the second quarter. Our growing position in private markets helped underpin our revenue in a quarter that saw significant declines in equity and fixed income markets, prompting continued rebalancing of investor portfolios. In response, our distribution efforts continued to produce significant new mandates despite unsettled markets.
Across our investment platforms, we generated total revenues of $163.8 million in the second quarter, only slightly below the 2021 second quarter revenues of $164.6 million. However, when comparing year-over-year first half results, revenues were up by $3 million. And when considering the impact of dispositions we’re actually up 7%, despite the challenging environment. Compared with the second quarter of 2021, higher revenues in private markets essentially offset a decline in public markets, which were impacted by lower average assets under management. Further, private market revenues accounted for 28% of our revenues in 2022’s second quarter, up from 22% in the second quarter of 2021.
Looking more closely at private market revenues, private market revenues increased in the second quarter by 11.9% to $45.5 million, up from $40.5 million in the second quarter of last year, benefiting from strong performance across key strategies, additional deployment of capital and continued fundraising momentum in our distribution channels. As a result, private markets recorded an increase of 30.2% in base management fees, 20.9% in commitment and transaction fees and higher share of earnings in joint ventures. This was offset in small part by a decline in performance fees, as carried interest realized in Canada, Europe and Asia last year was not replicated in this quarter.
Turning to public market revenues. On a normalized basis, public market revenues declined 7.4% to $116.8 million in the second quarter of 2022, when excluding $2 million of revenues related to dispositions that were included in Q2 of 2021. The decline was driven by lower average AUM impacted by market downturn when compared with the prior year quarter. The 8.3% decline in base management fees was offset by a slight rise in performance fees, mainly from crystallized fees from financial intermediary clients in both Canada and Europe. On a year-to-date basis, revenues in public markets this year were essentially flat to those generated in the first half of 2021, despite the broad market sell-off so far this year.
Now looking at our expenses. SG&A, excluding share-based compensation, totaled $117.4 million in the second quarter of this year, an increase of 2.4% from Q2 2021. Excluding dispositions, SG&A increased 2.9% on a year-on-year basis. As previously mentioned in last quarter’s update, the increase was primarily due to higher sub-advisory fees resulting from the StonePine agreement, where share-based compensation previously paid to the team now forms part of sub-advisory fees and are therefore included in operating expenses. Note that this was also the first quarter where the full impact was effective, as the arrangement closed in February 1, 2022 during the first quarter. Furthermore, due to amendments in IAS 38 impacting accounting for cloud computing arrangements certain IT costs which were reported and amortized as intangible assets in the past are now included in operating expense in the current quarter. A return to in-person meetings and additional travel and marketing in support of our distribution efforts also resulted in an increase in travel expense compared to the same period last year.
Looking at net earnings and adjusted net earnings. We recorded net earnings attributable to company shareholders of $10.8 million, or $0.10 per share, during the second quarter of 2022, compared to net earnings of $13.3 million in the second quarter of the prior year. Adjusted net earnings during the current quarter were $31.6 million, compared to $41.3 million in the prior year period. The difference was driven by lower revenues; higher SG&A, excluding share-based compensation; and higher financing charges related to the redemption of our convertible debentures, which required us to fully recognize an expense in the quarter for the remaining unamortized financing charges that related to the outstanding debentures.
Turning to adjusted EBITDA and adjusted EBITDA margin. We generated adjusted EBITDA margin of $46.4 million in the second quarter of this year, a decline of almost 2% from the prior quarter. The decline from the prior quarter was due to lower revenues impacted by the market downturn and higher SG&A, excluding share-based compensation; the SG&A being particularly impacted by the new sub-advisory agreement with StonePine. Notwithstanding this, our adjusted EBITDA margin increased in Q2 versus Q1, from 27.5% to 28.3%, and the 12-month trend in adjusted EBITDA still remains above 30%.
Our adjusted EPS has continued its upward trend this quarter. On a trailing 12-months basis, adjusted EPS of $1.66 has increased $0.08, or 5%, year-over-year. With respect to our recently introduced free cash flow measure, last 12-months free cash flow was just under $110 million for the second quarter of 2022, down from $145 million in Q1 due mainly to the exercise the funds dispersed in respect to a put option to acquire an additional 17% in the Fiera Real Estate U.K. for $18 million, bringing our ownership interest up to 97% in that entity. So far in 2022, our free cash flow has been impacted by two material non-recurring cash outflows related to the prior-mentioned put and the payment of accelerated vesting of share compensation related to the StonePine arrangement, which can be expected to have a drag in our last 12-months free cash flow for the next few quarters.
Turning to our financial leverage ratios. We entered the second half of 2022 having significantly strengthened our capital structure. Previously reported in April of this year, we extended our credit facility from June 2023 to April 2026 and increased the size to $700 million from $600 million. In addition, on June 23, we announced the completion of a subordinated hybrid private placement of $100 million with the Fonds de solidarite FTQ. June 30, we used the proceeds from the private placement to redeem all of the $86.2 million of our 5% convertible unsecured subordinated debenture that was due in June 2023.
These actions have contributed to an improvement in our funded debt, as calculated for our credit facility, just under $420 million, representing a year-on-year reduction of $32 million. Net debt has increased slightly by $12.6 million over the same period, largely due to the two aforementioned material nonrecurring outflows experienced in the first half of 2022 which impacted our ending cash balances. Overall, we have significantly improved our financial ratios and increased our financial flexibility with a funded debt and EBITDA ratio of 2.05x, down 31% from the level we had had at the onset of COVID in the first half of 2020. As such, are well positioned to weather further economic and market volatility.
In addition, by reducing our financial leverage we remain committed to delivering value to our shareholders, a fundamental pillar of our strategy, through the efficient allocation of capital. As such, we continued in the second quarter to return capital to shareholders through our dividend. Our Board has declared a quarterly dividend of $0.215 per share payable to holders of record on September 20, 2022.
In addition, subsequent to the quarter-end, we also renewed our normal course issuer bid, allowing us to purchase up to 4 million Class A shares over the 12-month period commencing August 16 and ending no later than August 15, 2023.
I’ll now turn the call back to Jean-Philippe for closing remarks.
Jean-Philippe Lemay
Thank you, Lucas. While our public markets platform was adversely impacted as a result of challenging market dynamics, we continue to deliver strong relative performance and generate net new clients and mandates, allowing us to make positive progress towards executing our strategic priorities. Our commitment to build a scalable, diversified and institutional-grade private markets platform augmented by strong multi-asset capabilities as well as the continued growth in our Canadian Private Wealth channel fueled by our diversified investment capabilities were shown as key hallmarks in the quarter.
Looking ahead, we are encouraged by the recent relative performance on our investment platform and our fundraising momentum leading into Q3. Improvements made to our capital structure through the amendment of our credit facility and the issuance of the private placement allow us the flexibility to weather through the current economic backdrop.
Going forward, we continue to focus on evolving Fiera Capital into a diversified global asset management firm. We are committed to being a top solutions provider to our clients while serving them with sophistication and care. We believe that being laser-focused on our strategic priorities will ensure our success in being efficient allocators of capital and foster long-term prosperity for all our stakeholders.
I will now turn the call back to the operator for our Q&A session.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] We will take our first question from Gary Ho with Desjardins. Please go ahead.
Gary Ho
Great, thanks. Good morning, everyone. Maybe first one, just on the net outflows, can you kind of give us some color what strategies that $2.5 billion just came out from, reasons behind that? And were any of that related to the StonePine arrangement as well?
Jean-Philippe Lemay
Thank you, Gary. The vast majority of our net outflows or negative net contribution is really focused and largely explained by a negative net contribution into our equity strategies. Yes, we have Global Equities net negative contribution, but we also have another equity strategy. So really, the story since the beginning of the year is really we’re not losing clients, but really it’s their behavior in response to market conditions that make them trim their exposure to equity strategies. And being very close to clients as well, it’s not a question of relative performance, either. It’s really more of an exposure management on their side.
Gary Ho
And are they just increasing cash on the back of that or are they rotating into other strategies? If I remember correctly, I think last year or 2 years ago there was increased efforts in your distribution platform to kind of capture that rotation. Maybe you can talk about how that’s progressing?
Jean-Philippe Lemay
That’s a good point, Gary. So I can definitely comment on the multi-asset side of our business. And on that side, private assets are definitely recipients of these outflows, especially in the shorter end of the maturity spectrum, especially on the private credit side, because that’s where we are basically positioned from a tactical asset allocation perspective. However, a significant portion of our equity mandates are specialized mandates. So that’s maybe one strategy for one client. That’s a big characteristic of our equity exposure. In those cases, we’re obviously getting closer to clients and increasing the proximity with the investment teams on their side to capture as much as possible of the outflows in these cases. But as it stands right now, we have been more negatively impacted in some of the specialized relationships that we have on the equity side.
Gary Ho
Got it. Okay. That’s helpful. And then my second question, I know you just finished Q2 here. I can’t help but ask about the Q4 performance fees, just given how material that number could be than it was last year. Any sensitivity you can provide, i.e., where markets need to go to attain performance fees there? Maybe on the private market side, any correlation kind of would be helpful for us?
Jean-Philippe Lemay
Sure. So the main driver of this, I would say, unexpected and material performance fee last year was related to our Frontier long-only and long-short strategies out of the UK. Year-to-date, that performance is going well, but not to the altitude of last year. So, if things go well, we are going to have a contribution from them this year, but we don’t expect this to be as outstanding as last year. In terms of the private market strategies, we’re continuing to deliver strong performance in there. And as the maturity of some of our more long-dated strategies, thinking about infrastructure, thinking about private equity, thinking about agriculture, slowly as time passes, we’re going to be able to capture more investment carried interest or performance fees as we go, and as we grow as well, but we don’t necessarily expect to get to the level that we had in Q4 of ‘21.
Gary Ho
Okay. And then just very lastly, maybe for Lucas, just on the adjusted EBITDA margin, 28.3%, a decent bump from Q1. How should we look at that number into the second half of this year?
Lucas Pontillo
I would say there is two forces that really pulled that number in the second quarter [indiscernible]. The upside really again as we continue to shift the revenue mix from public markets to private markets, the sort of fee revenue associated with private market assets and higher margin that we do employ on all those strategies, that’s helping to expand the margin as we go forward. And I think we’ve been particularly transparent this quarter, even in the MD&A, in trying to show the breakdown of revenues to give you all some additional transparency there in terms of how much revenue on a relative proportion basis is being driven between our privates versus our publics. So that’s on the positive side. And then sort of detracting from that, as I alluded to last quarter as well, which is we are now taking into that EBITDA margin what used to be that share-based compensation expense related to the StonePine team. And so that’s actually detracting for the quarter as well.
Gary Ho
Okay. Maybe just as a quick follow-up, Lucas. Just looking at the private side then, if we’re going to model, like, what would be the margins that we can expect from those revenues?
Lucas Pontillo
Gary, again, we don’t – it varies by platform. It varies by the fact that you’ve got performance fees on top of base fees. So it’s higher than what our average bps, what our average margin would be for the firm. That’s for sure. So I come back to that’s where it would sort of give you that positive traction. Again, we don’t disclose the margin on a per-level basis.
Gary Ho
Okay, got it. That’s helpful. Thanks. That’s it for me.
Operator
[Operator Instructions] We will take the next question from Jaeme Gloyn with National Bank. Please go ahead.
Jaeme Gloyn
Yes, thanks. I just wanted to dig into the OpEx performance in the quarter. It declined quarter-over-quarter from a – if we exclude the share-based comp standpoint. And I just want to get a sense as to how much variable comp was a contributor to that, or were there some other levers that would be more permanent from an OpEx standpoint?
Lucas Pontillo
Great question. Maybe if I break down some of the drivers there over the quarter. So in terms of sort of controllables, if you will, we saw an uptick in the quarter, as we talked about, in travel and marketing relative to quarters where we were traveling less. So we were, by no means, sort of back to pre pandemic spend in that area, but it was an uptick. So you saw a bit of a drag there. As I mentioned, on sort of the IT side, it was really more accounting driven. So we had an ability in the past to amortize some of these costs and they went through CapEx. There was a minor contribution there in terms of that uptick in terms of now having to take that into expenses, going forward. But the variable compensation part that you talked about, as I say, alluding to the Q1 discussion where we effectively had about $12 million of annual share-based compensation, that that would have gone through share-based comp for that StonePine team, you now sort of have to take that in on a quarterly basis for what that impact is going forward. So as I say, that $12 million was an annualized number. You can kind of amortize that over the year to get a sense of what that’s driving in terms of increased expense on the SG&A side.
Jaeme Gloyn
Yes. I was actually thinking that variable comp might have come down from a quarter-over-quarter perspective. If we’re excluding, like, the share-based comp numbers, maybe we can take the top line, but just thinking that variable comp might have been a contributor to lower SG&A expenses as a result of that. So thinking, like, Q1 would be more indicative of run rate levels versus Q2. But maybe correct me if I’m a little bit wrong on that?
Lucas Pontillo
You are right, but you have to – so there is a volume aspect of this and then there is a rate aspect to it. So year-over-year, you actually – you’re better to focus on the rate. Forget what I described as the impact of that share-based compensation on sort of the normalized level of AUM. To your second point, the overall variable compensation would have come down quarter-over-quarter this year by virtue of the decrease in markets and the decrease in revenue. But if you’re trying to model out the impact going forward and trying to normalize, if you will, the volume impact or the market volatility. This is why I say the driver on a marginal basis really has more to do with rate than it does with volume.
Jaeme Gloyn
Okay, great. And maybe just on the private market side. I noticed small redemptions on that front, otherwise, fairly solid performance in the private markets space, any additional color on that redemption within that space?
Jean-Philippe Lemay
Maybe I can take this one. It’s really related to some capital distribution mostly. So in some cases, we have funds that are maturing or asset portfolios that we are transitioning in other strategies. And in those cases, this is maybe the explanation, Jaeme.
Jaeme Gloyn
Understood. And last one, just still on private markets. I guess it varies manager to manager, but just curious how you think about mark-to-market on these investments. Is that something that’s done, and maybe you’ve discussed this past, so just to refresh, in terms of is that an annual process in Q4 or a more specific timeline or how do you think about that?
Jean-Philippe Lemay
Thank you. Most of them are on a quarterly basis, and many of them are on a monthly basis. In terms of market valuation, I mean, it flows through returns, but we are still seeing resilient performance across our key platforms; namely, the real estate platform. So the marks are on a quarterly basis in that particular strategy and platform. However, as everyone knows, there is obviously a lag between marks on the private side versus economic effect in the different assets. But as it stands right now, we’re still faring and being resilient in terms of asset valuation.
Jaeme Gloyn
Great to hear. Thanks very much.
Operator
And we will now take our next question from Graham Ryding, with TD Securities. Please go ahead.
Graham Ryding
Hi, thank you. There were some restructuring costs in the quarter, I think, $5.3 million. It seems like most of that is severance. Is that what that related to? Or what did that relate to?
Lucas Pontillo
It did relate to severances. We realigned a few platforms internally and the leadership structure. That’s why you saw that uptick there for the quarter.
Graham Ryding
Okay. Share-based comp, is this sort of an appropriate run rate now that sort of StonePine is fully sort of accounted for?
Lucas Pontillo
Yes.
Graham Ryding
Great. And then just free cash flow. You made some comments with this on a couple of areas in drag. I didn’t fully capture your comments. I’m just wondering if you could sort of reiterate that message. It sounds like there is going to be some further things that are going to drag on free cash flow a little bit.
Lucas Pontillo
Thanks for the question. So there will be no further things that will drag. The two sort of larger nonrecurring ones that have happened during the first half so far this year actually related to, a, the settlement of – we had a put option to buy out the remaining interest in our UK real estate operation. We took that ownership up from 80% up to 97%. There is a remaining 3% which will actually sell in the quarter, but it’s going to be quite immaterial relative to the 17% we just acquired in Q2. And that amount there was just shy of $20 million, and that required a cash disbursement there. And then likewise, relative to all of that accelerated share-based compensation that went through in Q1 regarding the StonePine transaction, there was a portion of that that was settled in cash and another portion of that that was settled in shares. So that portion that was settled in cash also was close to $20 million. So in reality, you could look at the drag that I was referring to is that additional disbursement of $40 million which happened during the first half of this year, which we’re going to carry with us for the next 12-month period as we look at the LTM lagging number.
Graham Ryding
Okay. Understood. That put option, it sounds like it’s almost more like an acquisition-related outflow, but you’re capturing that in the free cash flow?
Lucas Pontillo
We are. So I mean, in terms of how we disburse for that that is how it gets captured, indeed.
Graham Ryding
Okay. That’s it for me. Thank you.
Operator
There are no further questions at this time. Ms. Guay, I would like to turn the call back over to you.
Marie-France Guay
Great. Thank you everyone. That concludes today’s call.
Operator
Ladies and gentlemen, this concludes today’s call. Thank you for your participation and you may now disconnect.
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Fiera Capital Corporation (FRRPF) CEO Jean-Philippe Lemay on Q2 2022 Results - Earnings Call Transcript