National Bank Investments Shuffles Sub-Advisors: A Strategic Move or a Sign of the Times?

National Bank Investments Inc. (NBI), a subsidiary of National Bank of Canada (NA.TO), has made a significant shift in its portfolio management structure, transferring sub-advisory duties for its NBI Small Cap Fund and NBI Quebec Growth Fund to Montrusco Bolton Investments Inc. as of May 5, 2025. The move, part of NBI’s open architecture governance process, aims to align its investment solutions with evolving client needs while maintaining continuity in fund objectives.

The transition replaces Fiera Capital Corporation as the sub-advisor for both funds, with National Bank Trust Inc. (NBT) retaining oversight. This restructuring underscores NBI’s focus on diversifying its management partnerships while emphasizing stability—both funds’ mandates, risks, and investor disclosures remain unchanged.

Why the Change?

The decision reflects broader trends in the asset management industry, where firms increasingly prioritize agility and specialization. Montrusco Bolton, the new sub-advisor, brings expertise in small-cap equities and regional growth strategies, potentially better suited to navigate the Quebec-focused and small-cap markets. Fiera Capital, while a respected player, may have lacked the niche focus required for these specific mandates.

The parent company’s stock has held steady despite market volatility, reflecting investor confidence in its broader financial stability. As of January 2025, National Bank of Canada reported $484 billion in assets, solidifying its position as one of Canada’s six largest banks.

Responsible Investing: A Core Pillar

NBI’s commitment to ESG principles is central to this shift. The firm is a signatory to the UN Principles for Responsible Investment and a member of Canada’s Responsible Investment Association, aligning with growing demand for sustainability-focused portfolios. The Climate Engagement Canada initiative, which NBI co-founded, further highlights its focus on long-term, ethical investing.

Risks and Investor Considerations

While the transition aims to enhance performance, investors should remain mindful of inherent risks. Both funds are uninsured, and their values are subject to market fluctuations. Small-cap equities, in particular, are historically more volatile than large-cap stocks.

Historical data shows the Small Cap Index’s annualized volatility (measured by standard deviation) has averaged 25%, compared to 18% for the broader Composite Index. This underscores the importance of risk tolerance when investing in such funds.

Conclusion: A Strategic Play, Backed by Scale and Stability

National Bank Investments’ move to shift sub-advisors appears strategically sound. By leveraging Montrusco Bolton’s expertise and maintaining NBT’s oversight, NBI balances innovation with continuity. The firm’s $98.92 billion in assets under management (as of March 2025) and its parent’s financial strength ($484 billion in assets) provide a robust foundation for executing such changes.

Moreover, the emphasis on ESG principles aligns with global trends, as 81% of Canadian investors now prioritize sustainability in their portfolios, per a 2024 Bank of Montreal survey. While risks remain, the transparency in NBI’s disclosures—including updated prospectuses on SEDAR+—gives investors tools to make informed decisions.

In sum, this restructuring is less about upheaval and more about evolution, leveraging specialized partners to meet modern investor demands. For now, the focus remains on execution: whether Montrusco Bolton can deliver on NBI’s expectations while navigating Quebec’s dynamic small-cap market will be key to its success.