CC&L Financial Group and Leith Wheeler operate under different models but agree that ownership drives how managers serve plan sponsors
Canada's institutional asset management landscape is dominated by bank- and insurer-owned firms with quarterly earnings calls, public shareholders and the gravitational pull of short-term results. The independent firms that operate outside that orbit, however, insist their ownership structures produce different behaviour, not just different branding.
But how that plays out in practice depends on which model of independence a firm has chosen.
In the case of Connor, Clark & Lunn Financial Group (CC&L) and Leith Wheeler Investment Counsel, both firms are privately held and employee owned. Beyond that, though, they look nothing alike.
Different structures, same principle
Leith Wheeler is a single firm, 100 per cent owned by the people who work there or are selling their shares down in retirement, operating under one investment philosophy since 1982 whereas CC&L runs a multi-affiliate structure where each team is a distinct, separately regulated business co-owned by its investment professionals and the financial group.
"We're in an intellectual capital business, and the way to win in an intellectual capital business is to get great people into the firm and for them to stick around over the long term and build businesses," said Michael Walsh, president and managing director of Toronto-based Connor, Clark & Lunn Financial Group, adding ownership is the mechanism. "Someone who joins us has the potential to become an owner, and that's intrinsically motivating. It also gets people focused on creating long-term value.”
Perry Teperson, managing principal and portfolio manager of institutional clients at Leith Wheeler in Vancouver, agrees that ownership is the anchor, though his firm's version is structurally simpler.
"To be an owner at Leith Wheeler, to be a shareholder, to be part of our business, you need to buy into the way we manage money and have a long-term focus," he said.
Both firms argue that private ownership removes the pressure to optimize for quarterly performance. They also emphasized this pressure distorts investment decisions. Walsh argues that ownership aligns the firm's incentives with the multi-year horizons institutional clients invest over.
"It’s something that you can only realize over time and creates an incentive for business building, not just short-term profitability," he said. "You look across the industry and there's lots of great asset managers in different ownership models. This is just the way that we achieve that objective of getting great people into the firm."
Similarly, Teperson underscores the strong alignment between the way Leith Wheeler manages their portfolios and the way the firm manages their own business.
"Both of those have a very long-term focus, rather than a quarter-by-quarter focus," he said, noting the firm evaluates its own results over the long term and applies the same lens to the companies it invests in, looking out three to five years and sometimes holding names over multi-decades.
"By doing so, you make, in our opinion, better long-term decisions, and you don't react to short-term noise which could be the very worst thing to do when you're dealing with short-term volatility," he said.
Teperson acknowledged that while conviction in a philosophy is necessary for long term success, evolving is also important as client needs do change. About a decade ago, Leith Wheeler recognized the growing demand for private assets like infrastructure and real estate, particularly among balanced mandate clients looking to manage portfolio volatility.
Rather than build that capability in-house, the firm partnered with established alternative managers and created options for clients including infrastructure and a diversified private asset fund.
Independence also allows Leith Wheeler to hold positions that diverge from the benchmark without pressure to close that gap for the sake of short-term optics. He argues that looking different from the index is a prerequisite for adding value - a portfolio that mirrors its benchmark will, by definition, deliver a benchmark result.
Benchmark risk versus client risk
That divergence, however, will at times mean periods of short-term underperformance that require explanation to Boards of Trustees who are looking at recent results. He draws a distinction between tracking error, which he calls a business risk for the investment manager, and the risk that actually matters to a pension board: whether the plan can meet its long-term actuarial goals, typically expressed as an absolute return target or an inflation-plus hurdle. Beating a negative benchmark by a small margin does nothing for a plan that is still far from its primary return target.
Teperson contends that an outside owner focused on quarterly business results may not tolerate those periods of short-term deviation, and that pressure can push portfolio construction toward the benchmark, reducing the manager's business risk while compromising the client's long-term outcome.
"This is not an underperformance pattern that bothers us, but we have to explain it and acknowledge to clients that patience will be rewarded and pay off in the future," said Teperson. "The easier route is to position your portfolio closer to a benchmark and not deal with these moments of underperformance. In our view, that will compromise long-term performance, but it does create an easier path, I would say, for an investment manager and for an outside owner."
For Connor, Clark & Lunn, the firm’s independence removes the accountability to an external owner that can compress decision-making into short cycles. Each affiliate is a separate business with its own philosophy, research and portfolio management, co-owned by the senior investment professionals who work there and the financial group.
That means the organization is not tied to a single investment approach because each team defines its own. Ownership, in Walsh's framing, is designed to stretch incentives across careers rather than calendar quarters.
"Our decisions are made with that view in mind, delivering on client needs over the long term to achieve business success and build ownership value, not for an annual bonus or to meet a quarterly earnings target," he said.
Still, Walsh underscored that the affiliate structure has implications as each affiliate is a distinct, separately regulated business with its own brand and culture, which means the financial group cannot run a firm-wide initiative through authority alone, it requires buy-in from every team.
While affiliates can and do make different choices about investment philosophy and business objectives, Walsh suggests managing those relationships to meet everyone's needs makes his job harder.
When it comes to succession planning, he argues the model creates a built-in incentive that many asset managers lack. Because affiliate leaders can only extract their capital value over time - through internally financed buy-sell transactions after retirement - they have a direct financial reason to develop a next generation capable of sustaining the business and buying them out.
Walsh sees this as operating on two levels: leadership succession, covering both business and investment management, and ownership succession, where equity transfers gradually to the people coming behind.
Does ownership deliver better outcomes?
For plan sponsors, the practical question is whether these ownership arrangements translate into better service. Walsh acknowledges CC&L's multi-affiliate model has created friction. Historically, a plan sponsor working with multiple CC&L teams held separate relationships with each, and the financial group had limited visibility into cross-sale opportunities. Additionally, without a branch network, banking relationships or captive distribution, the firm has no built-in pipeline.
"We have to win every mandate on merit through a consultant search or a direct process. And we have no other business line to subsidise from, which means every relationship has to stand on its own," he noted, adding CC&L One, a multi-asset solution for small and mid-sized institutions, is the firm's response.
Still, Teperson noted that there have been successful and unsuccessful firms across every ownership model. What he does claim, though, is that independence reduces uncertainty. For example, he highlighted how an outside owner could introduce variables a plan sponsor can’t predict. That owner could also reshape the firm’s culture, alter outcomes, or drive away professionals who joined an employee-owned firm and have no interest in working for someone else.
"There's a higher level of certainty that the DNA, the culture, the philosophy that was built at a firm like Leith Wheeler ought to continue, because generation through generation, we spend a lot of time making sure that we stay true to our philosophy," he said.
