Q1 2021 IGM Financial Inc Earnings Call
[music].
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation, there will be and opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance.
During the conference call you May signal, an operator by pressing star and zero I would now like to turn the conference over to Keith Potter Senior Vice President Finance. Please go ahead.
Thank you and good morning, and welcome to the financials 2021 first quarter earnings call. Joining me on the call today are James O'sullivan, President and CEO of IGN financial data and merchants and president and CEO of <unk> wealth management, we have Barry Mcinerney, President and CEO of Mackenzie investments and Luke.
Gould Executive Vice President and CFO of IBM financial.
And when we get started I would like to draw your attention of course cautions concerning forward looking statements on slide three of the presentation on.
On slide four summarizes non interest measures used and this material on slide five we provide a list of the documents that are available to the public on our website related to the first quarter results for IGN and financial.
With that I'll turn it over and over to James Sullivan.
Okay, well good morning, everyone. Our Q1 2021 was.
A record setting quarter for IGN.
We achieved record assets under management and advisement and the quarter.
Of $248 $5 billion up three 6% and the quarter.
We also achieved record high total net flows of $2 2 billion.
The strength from wealth management and record high Q1 net sales at Mackenzie.
<unk> Q1 of earnings per share were <unk> 85, also a record high of 25% from last year.
I G M published at the seventh annual sustainability report yesterday, we continue to focus on areas that matter most to our business and stakeholders.
Finally.
We're thrilled with the growth of well simple and the value that it has been creating for our shareholders.
It's incredible really how much of the company has grown since the fundraising round in October 2020.
And as announced this past Monday the value of our interest has grown by approximately $900 million, which is equal to $3.78 per ITM share of pretax of.
Speak more of this in a few moments.
Turning to slide eight on investment returns, we continue to see strong equity market increases across major indices of.
Fixed income returns turned negative with the sharp increase in interest rates experienced in the quarter.
Overall Itm's average client investment return was two 7% and the first quarter.
And for <unk>, 4% year to date April 30 of 2021.
To this point the markets have shrugged off the COVID-19 the third wave as governments continue to provide stimulus and market participants anticipate and economic rebound as vaccines rollout.
While the pandemic is certainly not over as we get hit by the third wave here in Canada.
There are reasons to be optimistic as more and more Canadians are vaccinated each day, and we can envision getting back to something more normal.
And the near future.
Turning to slide nine.
Q1 long term mutual fund net sales were $38 $8 billion for the total industry.
And the $18 $9 billion for industry asset manager of peers.
This is the best fund industry Q1, net sales in Canadian history.
Turning to slide 10 on Itm's results for the first quarter.
Average assets under management and advisement of $243 9 billion increased $57 nine.
Billions of dollars or 31, 1% year over year.
Including approximately 30 billion related to the acquisition of G. L C and Green chip, which closed in December of last year.
Q1, and 2021 net earnings per share of <unk> 85.
It's a record high first quarter result for IGN.
Representing a 25% increase relative to last year.
Slide 11 highlights earnings contributions from each of our segments where.
And where we have brought our disclosures down to the net earnings line as announced in March of this year.
<unk> year over year increase and net earnings was driven by strong results within wealth management and exceptional growth at Mackenzie and China AMC.
Our proportionate share of great West life Cos earnings also increased meaningfully compared to Q1, 2020.
Yes.
Turning to slide 12.
M. Consolidated net flows were $2 2 billion during the first quarter.
Our record high result, driven by impressive net flows at both <unk>.
Wealth and Mackenzie investments.
I believe this quarter's results demonstrate continued momentum and these businesses, the Damon and Barry will speak to and greater detail and a few moments.
And as I mentioned, we released <unk> 2020, sustainability report yesterday, which can be found on the AGM financial website.
The report includes comprehensive information for you and your colleagues and has been prepared in accordance with <unk> standards.
Within the report we also provide an index of line to FASB disclosures and of greater and excuse me and the.
T T CFT report.
We're focused on the material ESG topics that matter most of IGN and our stakeholders with.
And with our strategy focused on building financial confidence.
Growing sustainable investing and accelerating diversity equity and inclusion and finance.
And 2021, we are also focused on furthering our role in combating climate change and the implementation of the T. C F. The recommendations.
We're proud to be recognized at the leadership level for CDP for the fourth year in a row.
And being named to corporate Knights 2021, global the global 100, most sustainable organizations.
I'm pleased to be leading a company where sustainability is integral to who we are and.
And we are continually evolving what we do.
To make the greatest impact for.
For our company and our stakeholders.
Turning to slide 14 wealth simple has experienced extraordinary growth over the past six months.
With <unk>, increasing by 54% to $12 7 billion and.
The clients growing more than two fold to over.
The $1 million.
Yeah. The equity raise has demonstrated the value being created for shareholders with Itm's interest valued at one point for $5 billion.
Which is a compound annual return on investment of approximately 80% of.
On our investment of $187 million.
As part of the fundraising round, we will be participating in the secondary offerings with proceeds of approximately $295 million pre tax.
And we will continue to be the largest shareholder with a 23% fully diluted of interest.
And at $1.15 billion.
Transaction accomplishes three key things.
One it includes the new funding round that will support wealth simple strong momentum and growth.
Two it provides high G M of the ability to monetize the value for our shareholders.
And while remaining of significant owner of well simple and continuing to support the company as it creates additional value.
And three.
The voting control is maintained by the power group, which provides strategic flexibility.
Proceeds from the transaction provide us with financial flexibility.
Or dry powder, which could be used for financially attractive acquisitions that bring new capabilities or access to distribution.
We would also look to share buybacks and the context of our overall capital allocation priorities and the opportunities.
The growth and evolution of well simple and our other strategic investments further reinforces the importance of applying of some of the parts of approach to valuing IGN.
Luc will expand on this in his remarks, but first I will turn the call over to Damian to review <unk> results.
Yeah.
Thank you James.
Turning the idea of wealth management highlights for the first quarter of 2021 on slide 16.
<unk> increased three 6% during the quarter the $1 7 billion driven by a combination of client and Thats, what the return of two 6% and net.
On inflows of $1 billion.
Loans were the best results and over two decades, we saw record high growth inflows with increased client productivity, which was driven by success in the mass affluent and high net worth segments of the market and net sales and the IGN products for $713 million during the quarter of substantial improvement relative to net redemptions of $36 million during Q1 of last year on.
And also discuss the strong performance of our profile of fee based program and the recently.
And now enhancements, including the expanded use of private market and investment and alternative investment strategies.
Turning to slide 17.
This highlights our net flow results and arguing over the past decade on the left and you can see the strong net flows of $1 billion on the quarter.
The chart on the bottom left and on the right demonstrates how our momentum which really started in early 2020 has continued into April with both net flow and net sales improving relative to recent years April is typically a seasonally slow months, but we had a record breaking month this year growth.
The gross inflows of over $1 billion.
And an all time high for the month of April and net inflows of $131 million is the best and 20 years and the third best all time.
Turning to slide 18.
Q1, 2021 growth inflows increased approximately 21% year over year to $3 6 billion. The highest Q1 result of the history of the company.
At the same time of growth outflow rate improved from 11, 2% to 10, 2%.
You can see the substantial improvement on the net flows and net sales and the idea of wealth management and Mackenzie products.
I'll take it a little bit of a deep dive on and less on the next slides, let's turn now to slide 19.
And on our last call I'll walk through some of the changing dynamics in the hygiene offering or <unk>.
Net flow flow of growth and how AUR transitions to other.
Starting on the left part of the slides and the second call you can see that Q1, 2021, net inflows of $1 billion, which.
Which was comprised of 640 $649 million of cash and short term savings and $265 million of third party and transfers from other dealers.
And the third column.
During the same time period, we have seen significant outflows and these categories, resulting in net sales in the ICU managed solutions and Mackenzie sales totaling $713 million.
As we move forward and we expect deposit flows and income transfers of third party funds and the securities from other dealers to continue to increase driven by new client acquisition and increased share of the rollout from our existing clients and recruitment of experienced industry advisors flow.
Moving to our managed solutions will also continue as consultants work with their clients and provide comprehensive financial planning and leverage the benefits of utilizing well constructed managed solutions.
Now, let's turn to slide 20 on.
Touch on the productivity of the consultant network and the key driving factors behind this trend.
Both of our consultant and the crews and our experienced consultant practices delivered significant increases in productivity and Q1 relative to past years.
And we mentioned on prior calls.
And of our consultants are having is related to new client acquisition within the mass affluent and high net worth segments of the market and increasing our share of assets with our existing clients.
This quarter, we have some impressive stats to share with you and this area as we look on our gross inflows for a new loans on the right hand part of the slide inflows from households that have over half a million dollars of more with us with the with Iga rose, 30% year over year, and 76% relative to 2019 and within these figures flow.
And from new client acquisition nearly doubled over the past two years.
Q1, 2021 gross inflows from the client relationships with less than 500000 also increased by approximately 23% relative to tier two years ago with the vast majority of this increase coming from the 100000 of $500000 mass affluent segment.
These are great results for our consultant network and I'm very proud of the progress we've made so far.
Even with these results we are clearly still given the momentum here as we continue to invest on our platform and our people and our capabilities.
Now, let's turn to slide 21.
This slide highlights for the recent enhancements to our I profile private portfolios.
And we're building on historically strong performance for context I profile includes a series of fee based solutions with approximately $22 billion and AUM.
And it is well.
Position that well positions us for the mass affluent and high net worth segments of the market.
Performance of the IPO.
On the program has been quite strong, but these assets have never been captured in our reporting performance information and the pie.
Starting in Q1, although this changes where I profile of performance is now being reported by Morningstar and included our MD&A as of March 31, 84% of the AUM and our profile is range of four five stars by Morningstar and the 100% three of the three stars or better.
We've been continually stepping up our game as it relates to our product capabilities aimed at servicing and mass affluent high net worth segments of the market and high profile has been a key focus of ours.
During the month of March we announced the introduction of the discretionary model portfolios that will be rebalanced as outlined in our investment policy statements specific to each client's investment pool at the same time, we've added six new private tools that bring new tools for the program, including expanded use of alternative investment strategies and private market investment. This slide highlights and example of.
The one of the model portfolios and building on this in April we introduced the new private equity mandate within the U S equity pool and announced commitments do not leave capital opportunities fund.
Going forward the discretionary and model portfolios will include active asset allocation public equity and fixed income securities liquid alternatives and a range of private market investments, including private real estate private credit and private equity. The solutions will continue to offer access to leading global asset managers like Mckenzie and vessels and north of <unk> capital partners.
Lastly, let's turn to slide 22.
Having excellent products like high profile of all critical to our success and these products and deploy with a goal of mine to fulfill the financial plan and tailored to meet the needs and the goals of each of our respective clients. As a reminder, at IGT, we refer to our financial plan designs and living plant and fulfilling and argue living plan requires more than just investment products are.
State planning mortgages and cash management insurance products and services are equally important.
Consultant and quietly usage of these products was another highlight for this quarter with our insurance volumes and mortgage fundings, increasing 23% and 25% respectively for last year. In addition, all of one HELOC origination origination volume were up 56%.
You will continue to see and emphasis on these areas and growth of these areas as part of the business going forward.
I will now turn it over to Barry Mcinerney.
Thank you Damon and good morning, everyone I'll begin my comments on Mckenzie as Q1 results on slide 24, we.
And we reached a new record high total AUM of $191 6 billion at the end of the quarter driven by strong returns for our clients and all time high Q1 net sales of one 5 billion.
Our record net sales reflect both strong Canadian retail investment fund industry of close which also broke records during the quarter and our continued ability to win market share for our competitors.
Q1 marked our 18th consecutive quarter of positive retail investment fund sales and the momentum continues to be broad based across asset classes and categories for both mutual funds and Etfs.
We also achieved several important milestones for further build on the momentum of our sustainable investing offerings elaborate on the subsequent slide along with a few highlights on our strategic relationship with northeast capital partners.
Slide 25 highlights investment fund flows which include adjustments for large fund allocation changes that can impact the comparability of results over time the churn.
On the top left compares Mckenzie as record breaking quarter to the last decade, you can see that our 2021 net sales results for a multiple of prior years.
The pace has continued into April with record high investment fund net sales of $539 million during the month and $6 billion on a 12 month trailing basis.
526 presents Mckenzie as Q1 2021 operating results total mutual fund gross sales of $4 5 billion were up 23% year over year, driven by our retail business.
<unk> continues to gain market share as demonstrated by our long term investment fund net sales rate, which was eight 1% at the end of April.
In terms of Morningstar ratings, 49% of Mckenzie of AUM, where and for a five star rated funds and 15 of our top 20 funds I'll read it for a five star for F series.
Turning to slide 27, Mckenzie of results and the retail channel has been very strong with first quarter investment fund net sales of $1 9 billion, including $1 6 billion for mutual funds and $300 million, primarily from active and strategic beta Etfs.
There are a few catalysts for our success.
Kenzie as top rate of sales organization of the country.
Wide ranging suite of investment products and solutions supported by both strong performance and innovation.
Of our top 20 net selling funds in Q1 five were launched within the last one to two and a half years, which means they do not yet have morningstar ratings and.
And the very favorable retail operating environment that has only amplified the opportunity for leading players like Mckenzie.
Slide 28 outlines the breadth of our retail net sales strength across our investment boutiques and the short term investment performance dynamics that we've seen in recent months.
After an extended period of outperformance of growth oriented funds, we win the strategies, which are of that where with value tilts the beginning to outperform.
And our capabilities and the value space of represented by our Kendall and North American equity teams, while there of value oriented products lagged the growth peers previously the recent shifts and market dynamics has led to near term outperformance by these two boutiques and as measured by the six month asset weighted percentiles.
Of course difficult to say, where exactly markets go from here and whether value of growth for outperform in the near term and.
Mackenzie, we're focused on being Canada's preferred global asset management solutions provider and business partner and our multi investment boutique structure positions us well to of relevant and strong performing investment products through various market cycles.
I would also note on the slide that we are seeing exceptional flows into the sustainable investing which leaves us to our next slide.
Slide 29 highlights on Kansas five growth catalysts that are reshaping the global asset management industry I'd like to highlight a few developments on the sustainable investing and private markets themes today.
As we discussed on our last call, we acquired Green Chip financial during December of bringing in house, the strong capabilities behind our top performing environmental equity fund.
As of March 31st this team now matches over one $4 billion.
Building on the success, we launched the Mackenzie Green Chip Global balanced fund during April the first environmentally seemed to bounce on the available to cane retail advisors and investors.
This fun brings green chips capabilities to the important balance category and Leverages, our fixed income teams established sustainable investing expertise.
We also launched the Mackenzie global sustainable Bond fund and one of just a handful of sustainable fixed income products available on camera today.
Also on the month of April we established our second sustainability focused investment boutique.
This new boutique will be led by Andrew Simpson.
Who has 20 years of experience of the investment management and has played a pioneering pioneering role and the Canadian sustainable investing space.
And the Kansas approach to sustainable investing is provide Canadians who had the opportunity to invest with impact through funds that are designed to generate long term competitive returns while supporting positive ESG outcomes.
We are working to strengthen the role of sustainability and our culture corporate practices and every investment decision we make.
Our partnership and equity ownership and normally for represents a key part of our strategy and the alternatives and private investment markets.
We are excited about the excellent fundraising of $1 5 billion achieved by north leaf the.
The north of the team during the first quarter of this year and.
And during March we officially launched on Mackenzie private credit fund, which brings northeast private credit capabilities to Canadian retail and a new and exciting way and we have concrete plans to launch additional private markets products and the near term.
I will now turn things over to Luke.
Great. Thanks, Barry good morning, everybody.
So on page 31.
And all and highlight on this slide is you'll see the three 6% growth and assets under management and advisement during the first quarter and bring our M&A up to $248 5 billion driven by good investment returns as well as $2 2 billion and net flows.
And also highlight that on Wednesday, we released our April results and you can see that April and eliminate up to $253 1 billion of another 2% increase driven by record high April net flow with the approximately $600 million as well as continued mark performance.
At this level of I'd highlight we're about three 8% above the average asset balance of Q1. So we have some some good growth heading into the second quarter when it comes to earnings momentum.
On page 32, and you can see our EBIT and our EBIT margins by quarter.
On the right I'd highlight at the very right column and that we had the full impact of the acquisition of the GLC in Q1, and Green chip and the GLC transaction closed on new year's Eve and delivered us and net $30 billion.
<unk> made of manage that is that more weighted average fees and as a consequence, you can see that the weighted average.
The decline during the quarter you can see in the top right that we've normalized the margin to exclude the impact of the acquisition and the margin was 46 basis points on this basis and was in line with last year and was a stable trend.
I'd also remind as you can see on the bottom left Q1's, the seasonally high quarter for expenses as promotional and processing expenses.
And our higher as a result of the RSP season.
Also remind the Q1 has seasonal weakness and revenues as our fees are are expressed as an annual percentage of assets and we only have 90 days of revenue and this quarter.
Turning to page 33, you can see of consultants statement of earnings and our 85 cents per share result, up 25 per cent from last year and in line with Q4 and a few quick points of Heartland the slide first.
First would be a reminder, if you look at the top row. There we've indicated the number of days of the period.
Mentioned on the last slide because of Devry of less days Q1 has the number of peculiarities that affect the various line items and I'm going to highlight more of that on the coming slide.
And I would remind that revenues are crude based upon the number of days. So we get 90 360 bps of the annual revenue rate during this quarter.
Second if you look at the first highlight too and the middle of the page you will see the business development expenses of $79 million or unchanged from last year and down $9 million for Q4.
I would note that this is a bit below our full year guidance due to timing of promotional expenses.
I'd also remind the Q4 expenses were elevated by about $10 million due and increased Mackenzie sales compensation at the very end of the year as.
As indicated last quarter, we reset the bar on this compensation every year and we raised the bar for 2021 and as a result of the expenses running at much lower levels.
I'd also remind that we have given the guidance and you can find it on page 42 that shows how the slide it's going to vary based upon sales activity and what you can expect at Mackenzie continues to achieve the at the type of growth is putting on.
Third if you look at the second highlight too and the middle of the page Youll share consolidated operations and support expenses were up $11 4 million or five 9%.
I would remind you that this includes $6 million of impact from the <unk> acquisition and also includes $1 5 million and higher pension expense that we disclosed last quarter was coming on.
Excluding these two items were up 2%, which is just a bit better than our full year guidance that we provided.
As you can see and cole of <unk> two on the right. We're keeping of our full year expense guidance unchanged and we provided that guidance on appendix slide 43.
Moving to phase III for <unk>.
Comments on our results by segment and by component. The first as indicated by James Mr. First quarter reporting Delta and net earnings line at the segments and component level.
As mentioned to you on our March 11 call. When we released this disclosure. We believe this change better reflects the business performance of the segments and enables the use of PPE.
And as also intends to encourage of some of the parts of approach to value as well as making sure we're positioning of the different businesses against appropriate global peer groups.
I've also cold and one point to a few noteworthy items.
First as a reminder.
And by James that the well simple offering and revaluation of our stake is one $5 billion and value.
I'd remind you recorded this investment at fair value through other comprehensive income so there's no contribution to our earnings for more simple.
Second our secondary transaction will close the few days and we will receive our 295 million and proceeds and we will continue to have of $1 $2 billion, taking the company.
I'd also highlight the China Amc's earnings are up 41% from last year, and we've highlighted here and they declared and we received in April our annual dividend, which was $26 8 million. This.
This dividend doubled from last year as a result of the earnings growth as Walt and increased dividend payout rate from 40% to 65%.
Look at the increase and net earnings by segment and highlight the 49% growth and Mckinsey to earnings and this was up 42% excluding the impact of acquisitions.
As you saw on various section Mckinsey looks poised to continue net selling of retail at a rate of over 10% of assets per year and there is a.
A lot of operating leverage on this business and we expect continued earnings growth at very healthy levels.
And at the bottom right, we put a sticker on the value of these investments and the.
The strategic investments at $4 2 billion.
This is based on the trading volume growth was LIFO shares our entry level <unk> of $17 five times try and asset management earnings our purchase price for northeast and the carrying value of $1 5 billion on more simple and $291 million of excess capital that we hold and various states and liquid investments.
Turning to page 35, we reflected consensus of analysts analyst earnings estimates at the time, we have depressed for IGN financial of $3 81 for 2021, and we've shown the allocation of these earnings estimates by segments and component.
Much like we did in March 11th we've taken the share price of $44 and 75, when we went to press on this deck and allocated to these components, while using our corporate $2 billion Thats been for strategic investments review and the last slide and allergy and the residual of the IGN Mckinsey proportionate with the earnings.
You can see at the bottom we've circled the implied p/e of IGN, Mckinsey, which on the spaces of eight four times and then we've compared the same for times to the average multiples of global publicly traded large cap wealth managers and the case of IAG and asset managers and the case of Mckinsey. We've disclosed of these peers of trading on average at multiples of 15 times earnings.
And we obviously, we encourage you to look at the strong momentum and IAG Mckenzie as earnings that are being put on right now.
For at Page 36, just a few quick comments first you can see the advisory fee and product and program fee rates are in line with expectations and guidance.
Good comments and on asset based comp because of the peculiarity and how it is.
And the industry.
Unlike our revenues as the base comp and IGN Mckinsey and speed at 112 of the annualized rate each months.
What this means is.
Net if someone estimate of this compensation by multiplying the annual rate by 90 days over 365 days the would understate this expense by about $2 $7 million we.
And we presented the right here and both bases and it's actually page you can see the rate and <unk> increased by about six basis points and we would expect the rate to be around 47 basis points for the remainder of the year the.
The reason for the slight increase and this line was there was a greater proportion of the EUA subject to this compensation, which means there is less cash and lots of money market fund and less non interest savings account and the base, which we don't pay as today's conference.
On page 37, and you can see I use the income statement with the earnings of $110 5 million and the quarter.
And make two comments the first you can see and other financial planning revenues, we had an increase of 15, 8% year over year, reflecting higher insurance and mortgage volumes, which dealer.
Viewed with you a few slides earlier.
I would remind you that insurance of seasonal and our peak sales season of Q4. So we view this year over year growth and Q1 is very encouraging.
And as David mentioned, and a comprehensive financial plans, our focus and we see significant opportunities for further increase and the use of insurance lending and other banking price with their financial plans.
Second you can see our operations and support expenses were up 2% for $2 million from last year.
This is right in line with our guidance of <unk>.
5% growth plus the $1 5 million per quarter and pension expense that came on and due to interest rate increase of lost.
Decrease of last year.
We have given us putting out at the bottom right.
Just just to give you guidance going forward that as a result of interest rate increases and the quarter Youll sooner financial statements that the funded status of the pension improved by just over $100 million pretax and the first quarter.
And let you know that under the accounting requirements annual pension expenses set at the beginning of the each year based upon the rates prevailing and assumptions for really at that point in time, but I would let you know that had the current rates been and effective January one of our 2021 pension expense would have declined by $1 million as opposed to increasing by $6 5 million. We point. The so does this.
And so obviously a tailwind for us moving beyond 2021 that you should be aware of.
Moving to page 38, we presented the net asset management fee rates for Mckinsey on the right hand side, you can see the impact of the <unk> acquisition coming on during the quarter and the 53 basis points is right in line with expectations and guidance.
And we've also include the fee rate, excluding the impact of the acquisition of $68 seven basis points and I'd, just highlight too the rates down very slightly and the first quarter for a few of the same reasons discussed and the <unk> section.
First some dealers still continue to sell PSP, and we had increased and the payment of sales commissions and the sort of expenses incurred.
This is the $2 million increase from Q4 and it is including this rate second as mentioned earlier the asset based comp is paid for the quarter of the annual rate versus 90 over $3 65, and this was worth and other basis points of the client so very stable fee rates and the spirits are obviously being supported by the strength and retail.
On page 39, you can see the Mckinsey income statement.
<unk> $48 million and net earnings was an increase of 49% from last year and 18% from last quarter. As you look through the percent changes youll see the operating leverage inherent in the business given the extent of fixed expenses and.
And the second point, you can see that on operations and support expenses increased by eight by $8 8 million from last year.
As guided last quarter 6 million of the increase was the GLC and Green ship acquisitions and this does include the purchase price amortization. Excluding this the expense was up three 7%, which is the the lower full year guidance of 5%.
We also mentioned earlier business development expenses of $20 million or at the same level of Q1 of 2020 and I would remind you that on page 42, and the appendix we've given guidance on how this line item will vary based upon different levels of retail sales activity.
This concludes my comments I'll open up for questions.
Thank you we will now begin the question and answer session.
And the question queue. You May Press Star then one on your telephone keypad, you'll hear of tone and acknowledging your request.
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Our first question comes from Nik Priebe of CIBC capital markets. Please go ahead.
Hi, good morning.
I just wanted to start of the question on investment performance one of the.
The things that stood out to me was I noticed the proportion of fund assets at Mackenzie ranking above median on a trailing 12 month basis moved from the high 70% range and Q4 to 22% and Q1, just wondering how I should interpret that like was that the that would've been related to a particularly strong period of relative <unk>.
<unk> and Q1, 2020, and pulling off the TTM period or.
How would you attribute the sequential change.
Sure Great question and that can you and you are right actually it's Barry so.
Just quickly so of the short term performance Youre right. Our Q1, and 2020 was exceptionally strong and we actually with all of our boutiques collectively we probably perform best and Mackenzie during down markets and choppy markets, which was certainly had in Q1 and 2020 and into 'twenty and the Q2 rather.
And so we had historically.
High percentage of four and five star AUM, the double edged sword, obviously, because our AUM our percentage of might go up when the markets are choppy and downwards, and therefore consumer confidence is low and their proposal of low.
That's our going one way and as they have and mostly upwards, we might lag a bit.
And with some of our performance, but overall if you look at our for five star percentages of Chile, 40% to 60% in terms of the AUM over the long term and so we were at the high end of.
The first couple of quarters last year and and <unk>.
And we dropped off at Q1 of 2020, we're down about 49, 50%, which is actually above average and that's it.
And so we're very comfortable at that level.
And if I may though on the long term number.
The the percentage of five star has actually remained relatively consistent the last several quarters and as you know the of the.
The vast majority of proponents of our flows are going into a five star funds <unk> and and toward no star funds as I mentioned and my remarks, because we've had success and launch of some really attractive new products that have yet to garner of Morningstar star because of less than three years old.
And those flows have been very very strong principally and others for <unk>.
10 of them easily the top couple of for instance, and you probably know the global environmental by Green Chip and the <unk>.
Lou waters global balance both under three years old and they are collectively up to about $2 3 billion of AUM. So obviously and they come on board with the stars that numbers will go up but I think you've kind of about right. The long term is where we think we are roughly 46% at the mid range.
The five stars have held the.
The first starts to come off a bit obviously with the math and and someone like an IV form of big fun, but it toggled between three and four star and it goes up the four or five star with again markets are down because it's a really downside risk protected type of building blocks and then the lag a bit when markets are up so very.
Very explainable and slide 28, if you recall you can see the all of the boutiques that we have these aren't all of our boutiques probably these are the ones that syllabize Mackenzie mutual funds.
And we've got probably the most broad array of of styles probably of any manager in Canada and of particular note on the left as I mentioned and our value oriented, but you'll see those numbers where their performance was pop last six months and whereas for the lagging obviously for quite sometime as growth outperformed value of and then you see of growth oriented.
Which are still holding five star of amazing, particularly growth and blue water, but they have their performance.
Hearings for their style, which they have has come off of it the last six months or so so that we just rotate the with advisors, we're starting up a lot of discussions of advisers on value.
Most of these.
Teams of our fundamental but our quantitative team you can see exceptional in the short term farmers that are coming back. So it was really advantage to the to our model of multi boutique were able to rotate different styles, but what really is important and I stress this that our wholesale.
Partner with advisors to help them build more enduring portfolios with building blocks and not pushing the hot product and we think all of these value growth quant fundamental of emerging market domestic and now holds all play and a really strong role collectively and our portfolio hopefully answers. Your question on thank you.
No that's helpful very thorough.
And then just switching gears on the on the wealth simple financing round Luke I think you had alluded to the fact of the <unk>.
Proceeds from the secondary offering and participated in and we'll give you greater financial flexibility, but are they earmarked for anything specific or are you comfortable holding of greater level of excess capital and balance sheet until you can find a suitable redeployment opportunity.
Thanks, Nick.
Good question.
And if theyre not earmarked for anything specific at this point.
Nick M&A is clearly a possibility as our share buybacks and.
As we've said previously on M&A.
We're attracted both to wealth management and asset management, we we like wealth management because of its stability of the resiliency of the the earnings profile.
And any interest we had there would be that would be Canadian based and it would be skewed to the high net worth.
On the asset management side.
Barry has spoken regularly about his five growth leavers, China Alts retirement Etfs.
S alright, those are areas of potential.
Potential interest.
And on share buybacks, what I, what I'd say is we view it as it's an important tool.
If it's done properly and can be a driver of EPS and a driver of ROE and.
We wanted to we could file and normal course issuer bid pretty quickly. So we don't have specific plans are.
At this time.
But we have a fair bit of financial capacity and I think thats important to point out between unallocated capital, which is pushing $300 million before of the secondary the wealth simple proceeds of.
Senior debt capacity and and.
And potentially other stakes that could be debt.
And it could be monetized.
I think we've got a fair bit of dry powder and a lot of optionality and a market that is and on the economy.
And that is reflecting.
Okay. Thanks for taking my questions.
Our next question comes from Gary <unk> of days your debt capital markets. Please go ahead.
Thanks.
Good morning first question Barry just want to go back to the next question on the performance and you mentioned the shift from growth to value.
If that plays out are you able to capture that churn just notice on on slide 28, and the performance of your growth funds are quite a bit better than the value and do advisors look at the six months more or more and more on on the on the three year numbers.
Great question, Yeah. So the way, we presented us with advisors and more and more we're having some I think very thoughtful discussions with them.
And that when you are again building on.
Our portfolio well diversified portfolio really should have a rule of both value and growth now.
As I've mentioned on prior calls in Canada, We don't have style specific universes, and the United States United States has style specific of universe, and so you have of value universe of growth universe of core universe and.
And Canada, it's sometimes difficult to put value in the portfolio, but in a sort of perform for 10 years, because you're right all of the value of mattresses, usually one of the star. So because it's the growth of the style has been so pronounced the strong growth versus value except of course last six months, but we've cut we've been we've been signaling. This for a couple of years now and two points of the fact that.
To take some take some gains.
Gains off the table to rotate a bit back to value to have a more diversified portfolio has been resonating. So I think it's been an educational process for last couple of years and it might take another couple of quarters, but yes to answer. Your question. We think we would benefit there's no other way there's not very many value managers left it's unfortunate I've been through.
Of this for 25 years now and I was in the United States and the high Tech boom of the late Ninety's, where value was that they were declaring which is never down its a wonderful style and offsets growth very well value of it was a little different nowadays and it was 20 years ago.
But I think that there's a lot of.
Interest and discussions we've had we're having right now of advisory on the whole sort of say listen.
They are listing the fact that they should rotate and put some more into value and.
And have a nice bounce between value and growth and we would actually we believe we are well positioned with two very good value managers, and our condo and our north American equity side.
Many of US as head of the of the value managers left ours are good very good.
Stick their style and you should you should start to see some flows coming into the value side and Canada in short order, So we'll see but.
But that's again our portfolio construction led sales process.
Here's a well diversified portfolio of here's how you put these building blocks together and there is good.
The discussions going on right now and.
I think you're right, you'll see some value for those come come for shortly you can see for for instance, the redemptions have really stopped theres no redemption right out of value and just more of a sales issue with the come on North American equities and we think this is kind of pop.
Ultimately soon thank you.
Got it great. Thanks for the color.
And then second question for.
For James just when I look at slide 30 for one of the bigger discrepancies and carrying value and fair value of this your.
On the EMC asset.
We've seen the monetization and personal capital while simple last week.
And what alternatives are you looking at on on the China AMC side.
Sure well.
And that's an investment we're proud of.
And that investment reflects.
To be Frank 50 years of relationship building and China.
And we very much of you China AMC as a best in class asset.
I think it's a clear leader and their field.
And so when you bear in mind that the China represents the second largest equity market globally, and the second largest bond market.
I think Canadians are gonna want exposure as part of our globally diversified portfolio of that.
Satisfies their retirement needs.
<unk>.
For all of those reasons.
And we like the asset and we we would and the phone us of time.
On consider more if it's on.
That opportunity presented itself.
Okay.
And then my last question, perhaps for the look on Slide 42, where you gave us the sensitivity of.
Business development expense relative to the Mackenzie gross sales just curious your crystal ball, especially on the right bar charts. There what are you accruing for given the strong sales and how should we think about this number of for the balance of the year.
Great question and it is.
We continue appointments growth, there's going to be some variability from Q1 level and so we'll be assessing each quarter.
If you look at what's being put on and we got April we've now got a few days and May work.
Heading to the right hand side of.
On page 42, there with the.
And it's certainly and our sites debt.
The full year retail net sales could be $5 billion or even beyond that as we continue to work through the year and this variability is what you should expect.
And how should we think about you are accruing for that are you.
For Q1 April and accruing more on the left hand side and then as the year progresses, you'll see the numbers and then you move more to the.
Is it going to be more of a great great great question.
Question for Q1, you can think brookdale being at or above the $2 5 billion, Mark and as we continue to get get closer towards the $5 billion of beyond we will be assessing every quarter.
But what I wouldn't expect something like the surprise we had in the Q4 2020, we're truly it was just remarkable and November and December and we had to make a significant accrual to reflect the the increase sales being put on this year is just stable steady growth, we will be assessing each quarter and it should be pretty predictable this year.
That's helpful. I was looking for that to go and factoring number okay. Thank you that's it for me.
And welcome.
Our next question comes from Tom Mackinnon of BMO capital. Please go ahead.
Yes, thanks, very much good morning, everyone.
James You said in your opening remarks.
Debt.
Thrilled with the growth that you saw well simple. So I guess the question is which you're thrilled with something why do you sell it and then and then if the if the if the answer is well that gives us flexibility to invest in.
Distribution capabilities.
And why not look to well simple and it's had great growth and so maybe you can.
Share with us.
No.
What youre thinking there was in terms of why you sold down on them and investment debt.
You and.
Are thrilled with.
Well, we certainly are thrilled with it and I think.
Anyone and our position would be would be thrilled to.
Half of the have the holding and that company that debt.
We do Tom.
Look at the growth and AUR and look at the growth and clients I mean, they have proven to be remarkably nimble for <unk>.
<unk> agile open minded about how to compete digitally and financial services, and Canada, and they've I think Dave just achieved an unprecedented level of success for a company of third type in this country. So.
That's the basis of being thrilled and of course the.
The Mark on our balance sheet is I suppose the ultimate reason to be thrilled because.
It was on $187 million of investment as of now marked the prior to the secondary to one point for a $5 billion.
Look as you know so you asked a good question, if you're thrilled why why sell.
And my answer would be prudent.
It is.
It just struck us as prudent to.
And to take some money off the table.
I spoke earlier to my view that the World is replay day.
And that there is a high degree of confidence and boardrooms across the country and frankly across North America.
And I think we put the and for a period here, where there is a very very significant level of of.
And <unk>.
M&A opportunity and wealth management and asset management and.
And so.
You know the the proceeds of of that sale after tax of $260 million.
Add those to our unallocated capital and our senior debt capacity and.
As I said, we and this gives us dry powder and thats kind of give us.
Don't worry about our ability to deploy capital I think of our thesis is right.
Going to be and opportunity to deploy this and do some great things for our shareholders. So for.
Deeply proud of well simple we've taken a little bit of money off the table, we continue to be the largest shareholder and continues to be controlled by the group.
And that overall, Tom just struck us as kind of the right balance, but yeah, we're thrilled and we love it.
And to what extent as debt.
Has it been.
What do you get out of owning yet is it just strictly a strategic investment or and it's never really been integrated into your platform.
I mean is it just you just listened to the secrets.
As a result of being on the board.
And.
What is where does this position where does well simple fit long term and.
Is it just nothing more than a strategic investment will it ever be integrated and eat to any extent.
Yes, it's a good question and I'll tell you how I think of it Tom.
I think about solving for the problem of incumbency.
I think about.
Our management team and.
Being very very busy day and day out focused on the business at hand.
And well simple has done what portage has done and what our fintech relationships generally have done.
It's really helped our management team not just focus on the business at hand, but focus further out to horizon number one.
Focus further out still to horizon number two it gives them relationships and the Fintech community. It gives the dialogue and the Fintech community is created very real partnership opportunities with some of these investing companies.
And as I said the problem of incumbency is a very real one and that is why two large older companies not see what's coming up and.
The best way I think the sulfur incumbency is to make sure that you have something like what we have which keeps our management team very much kind of current and very much on the front seat.
As they look at how the industry is going to evolve so that kind of solving for the problem of and competency is one of the things I like most about it.
But theres also a lot of business done I mean, we are a major investment investor in the conquest financial planning and we're rapidly rolling that out across the wealth. We've had numerous conversations with coho Berry has done a significant amount of business with the <unk>.
And the past with the with well simple and I'll, let him speak to that and the moment, but it is I really I really view of this.
Exposure to Fintech.
As really important and just making sure that.
IGN is on at the front seat and competitive Barry do you want to add some thoughts.
If I could James Thanks, just amplify your first point and I'll speak on the house of National side and second on the first point Youre right I think we've always viewed well simple also is attracting.
Investors into the wealth ecosystem earlier, I mean, you've seen hundreds of thousands of new clients of all SIMP.
<unk> come into the arguably the wealth ecosystem of Canada, much earlier and earlier than they would or coming in at all because you wouldn't see the millennials and pick those and their twenty's and they come in and start to say, but it's wonderful that theyre starting to save every month and.
And and then that's we don't know the journey of they take at some point they might need advisor once once they hit a certain point of their career sort of point of life. So we think the peso was the advantage on the asset management side as James pointed out we are Mckenzie as you know we've got our ETF hub.
Very proud of each of our franchise of the it's hitting 10 billion probably next week. So it was growing very very fast and so we've been increasingly working with well simple of weapon to design.
Etfs that they need that we can manufacture for them. So it's really growing synergy even with and IGN between.
Well simple and Mackenzie that we're quite excited about actually because as you know the lot of their new businesses with him and well simple are growing very fast, but the core for.
Financial plan with the technology platform is also growing 15% plus a year and so that's another connection point and Tom Tom between the IGN and Mike.
And within wealth simple and Mckenzie of that you should see some future growth going forward.
Thanks for the color.
Okay.
Our next question comes from Geoff Kwan of RBC capital markets. Please go ahead.
Hi, good morning.
My first question was maybe just taking on some of these questions around the Fintech investments and just was curious I know that you mentioned.
And stuff like Tahoe and conquest, but.
And within the potash and three.
Private equity fund are there other investments debt.
And you find really interesting whether or not and.
And a potentially very significant.
The financial return.
Type of opportunity.
Also just one stat.
And may eventually become and.
The attractive.
Entity that you would partner with and incorporate into.
Some are within the ITM business.
Yeah.
The actually I'll take that one day.
The fourth or sorry.
Go ahead.
Yes.
There's a variety and I think most of them right now are playing on James James The theme of income and see if those places where you've got a management team is energized and focused on the space.
Really synergistic to the rest of of what happens and IGN.
And so there's a few of those on the on the mortgage side of our business and elsewhere that we find very exciting.
There's nothing that's at the the level of wealth simple right now where this is the true success and something Thats, just got the clear momentum, but I'd say broadly we're.
Quite excited about the ports on the ecosystem, we have just been of lead and lead Investor and fund three and.
And as James said that ecosystem opens a lot of doors for us to for the tables, we wouldnt otherwise be yet and.
The leverage management teams that are top of their game and and really bring capabilities to AGM that we weren't otherwise have.
Okay. Thanks, and just the other question I had was a bit more of just bigger picture wise.
With respect to.
Advisors, and Canada, and kind of the approach to managing client money.
Is there anything that you would say is kind of changed in the past.
Decade, or two with respect to the types of investment cognex and they are choosing for their clients.
And it has things like having.
Two major.
The market downturns, and I guess, the little over a decade.
Whether or not it's the regulatory changes that we've seen.
And kind of get and getting rolled out over the past decade has that changed how they manage money and the implications for what that means.
For <unk> and Mackenzie.
Yes, Tim and I'll start the finish of comparing very well.
The news, but I would say that.
Yes.
On the on the whole.
Advisors and how they view portfolio construction has changed simply because the amount of risk that you need to assume now to achieve the same type of return has and.
Tripled over the last 2025 years, and it's forced the advisors to really look at really.
Really the strategic asset allocation and first and making sure that they have the right set up the have the right asset classes.
And involved in their portfolio of construction and then the they have them at the at the right percentage is based off of what the what the client wants to achieve so from a from and IGT perspective. That's of course, that's rightfully so and I mentioned I profile during the presentations or to really look and make sure that strategically we are and asset allocation that makes sense and that.
We do look at all of the opportunities out there there are far more tools available to us and there were 10 20 years ago and.
It's incumbent on us looking at public private.
The cat bias you talk about value grow if you can go on and on and on about the opportunities out there. So that's why we really employee.
Mobile solution of our managed solution.
The type of approach at AIG, we take we take that off the hands of of our advisors because thats something that we are good at and that we allow them to really focus on the relationship and making sure that not only other offering the best risk adjusted returns for their clients, but they have enough time to really focus on the aspects of financial planning and investments early on.
One of the of the six aspects of the financial planning.
If I could add Damon and spot on Jeff.
Going forward the advisors to damons point, there are more and more tools and the toolkit that they can now access and they have to access and it's it points to this whole.
Democratization of all of these types of investment strategies.
That were sort of at the domain of the sophisticated institutional investors and our now about are now coming to the advisor and investors, which is really exciting, but actually necessary to because again with low interest rate environment going for perhaps more muted the equity public equity returns going forward.
And you need you need more on the tool kit to put in that portfolio to get the risk adjusted returns and they need and its day in the segment you see the liquid alts for now and Canada approved three years ago now the private ultra coming for the lighthouse principles with her om's wrappers with north leaf.
James mentioned, China, China, and the equity and fixed income markets weren't really accessible by Canadian investors for even a couple of years ago. Now they are we ourselves and Mckenzie as we already of file of launching a Chinese the Chinese fixed income mutual funds and June or July to complement our fast growing equity and try and Chinese equity mutual fund.
It's really take a look at your traditional equity portfolio and extended and.
Two areas, such as China, and or privates extend your fixed income into.
Again, the other types of E M D and Chinese and fixed income and private credit now ex.
And you know James point Reflation of inflationary not that we're gonna time that but put some building blocks and they're like infrastructure, and Reits and gold and precious metals of them.
Our natural inflation hedges, it's a real rethinking of the portfolio of construction that we're fortunate enough to to help David on I G. Mckenzie to do some of that for them and the right.
And I profile is just the institutional quality product that's forward looking out to other advisers need going forward.
And and that's exactly what we're seeing more and more with Mckenzie and our discussions with advisers.
Thank you.
Great. Thanks.
Our next question comes from Graham Ryding of TD Securities. Please go ahead.
Hi, good morning.
But just wanted to.
Touch on the the.
The operating leverage this quarter and the lack thereof, just the nice lift and revenue quarter over quarter, but essentially the expense growth fully offset.
Should should we be the audit.
Non interpreting this quarter as sort of indicative of the operating leverage within IGN and us.
Big picture was there some seasonality of play this quarter.
Thanks, Brad and I will take that one.
And we view there as being a tremendous operating leverage the best comparison of Q1 of last year earnings were up 26% of consolidated and at the at the component level.
For very strong as well.
I would I would highlight that debt there is seasonality and significant seasonality and the inter business and of our expenses in particular, because it's because it's the RFP season, we've got.
Amplified promotional and processing expenses every Q1, so any comparison to Q4 is no longer the appropriate and the in the first quarter because of the seasonality and we view that as being so much operating leverage and that's what's led to Mckenzie as earnings being up over 40%.
From last year, when you exclude the acquisitions as well as strong growth of IAG and that's what you should expect from these businesses moving forward. There is theres a lot of fixed costs, we have given guidance for the full year and and.
And yet up year over year, theres going be tons of operating leverage going forward and Q1 is an odd one not only because of apple and expenses, but because we have the.
Fewer days in the quarter.
And so I talked about the peculiarity between asset based comp, which is one quarter of an annualized rate relative to our revenues for their $93 60 bps of an annualized rate. So there's two seasonal headwind, but yeah. We're so proud of the operating leverage put on and and we're still excited about the future.
Okay understood.
Jumping to north leaves the contribution from north of it was lighter than expected flow.
From my perspective, just as.
Is this quarter indicative of what we should expect from the.
Non of asset or was there something sort of weighing on.
It was just under $1 million Youre on the you're on a really good point.
Look again the.
The earnings for a bit late for for normally for on two fronts.
One the commitments the new business being put on is very strong you saw they're referred to the $1 5 billion and new commitments in the quarter.
That's $1 5 billion on the on a base of 15 billion of AUM. So you can think of that is 10% growth and their business in the quarter alone the weighted.
The earn their money, though is the is most of it generate management fees when the money is invested and and right now at this time the.
Been slower and putting the money the work of an expected given the market that we're in and where.
For some of the valuations are at.
And that did create a leg and the in revenue that will be put on is the commitment to get put to work and the.
The results the way and accounting true up of about a $1 million debt that hampered them that was just the.
Again of true up and the results. So we're we can consistent with our guidance for the full year of $10 million from that from Barclays and.
And like I said, just given the growth of putting on.
This is going to be a very high growth business for us going for it.
Okay. That's helpful and the $1 5 billion raise was.
IGN part of that commitment at all or was this all third party of Europe.
It was substantially third parties and you can think of that at 1.5 billion being about a $1 billion private equity and none of which would come from IGN and $250 million to each of us of infrastructure private credit and so we've made after the commitments at IGN and Mckinsey, but that's just just starting and will come on over time.
Okay.
Understood and then just my last question a bit of a follow on but you talked about.
Well simple and Theres some.
I guess, the Mackenzie Etfs within within the distribution channel is there anything you can quantify there like how material is while simple is the distribution channel for Mackenzie Etfs.
Hi, it's Barry again the.
So what we what our partnership between Mckenzie, and well and well simple actually has helped us has and the path of help them to build.
Built well simple brand of Etfs and so there are two E. S T E.
E T S for simple branded been very very successful on that channel given that you can imagine with the demographics being mostly millennials. So I believe that at least over half of $1 billion, if not more between those two each aspect of more 606 or $700 million.
And then they're launching.
Sharia compliance each year for simple that we manufactured for them. So the discussions are going on with them too.
A combination of principally it's been early days of helping them manufacturer, while simple brand each house, which essentially off the of the manager of the back office or really Mackenzie Bobbi Brown and the wealth simple for them.
And also ongoing discussions with them also with some of our new ETF launches.
And Mackenzie to use Mackenzie Etfs of their portfolio. So it's a combination of both and we're actually quite excited by that are.
And by that distribution channel.
With the simple between the for the Mackenzie Etfs. Thank you.
That's it for me thank you.
Our next question comes from Scott Chan of Canaccord Genuity. Please go ahead.
Good morning.
Maybe sticking on that ESG or sustainable theme on the retail side of.
Obviously.
And the bus growth and then for the quarter into Q1.
Barry is there an opportunity to expand that.
And all of that.
Institutional channel.
I know the obviously that's been.
The harvest volume my understanding on the Green chip for I.
Kathryn Mckenzie has and institutional assets.
That's sustainable the funds.
Great question absolutely.
No the.
The interest and the.
And the application of ESG.
Actually began in the institutional marketplace and now it's coming very strongly to the retail marketplace hearings and Canada as well as the United States as we anticipated and its coming very very strongly like the speak to on the moment on institutional side. The yes. So we've been green.
Green ship, we on boarded and there safely.
At home and Mccandless of boutique and we've been actively now bringing them through our institutional sales opportunities in Canada, the U S and Europe, and and actually in China, surprisingly, where ESG is really taking off and we have a strong interest in.
And all of those regions for Green ships and <unk>.
And our mental equity global environment of equity product and strategy and you'll probably hear from of shortly in terms of some of the early successes, but we've been very very pleased that's a real huge door opener. When you go to these institutional consultants and directly to these large pension plans of sovereign wealth funds to say, we have a world class of environmental and.
Equity a 14 year history.
Our successful history in terms of the performance and so that that's been building very nicely and that's why I was mentioning the institutional wins sort of lumpy they come in.
For you all recall last April and 2020, when retail was a little bumpy and Canada. We brought in over two and a 5 billion on board of institutional wins. Since then it's been a little slow, but the pipeline was back up again and the two leaders for US the pipeline are green ships environmental equity product as well as actually our emerging market product.
And Quant team, which has outperformed the index for the last year over 1000 basis points, so where.
And where we lean in where we need to and are there has been real strong Inc.
There and I know that you've asked about the state of the sustainability. This is really a game changer for the industry in Canada and other game changer. There is remarkable interest of the sustainability as as we know capital redeployed and this area of tens of trillions of dollars of on becoming a.
Decades, and so where we've cut the you know we launched the green chip balance to relaunch the sustainable Bond fund and we have filed that was the first balances environmental teams and as I mentioned and my comments, we hired for one of the pioneers hobbyist yesterday investing and camp, Andrew Simpson and Youll see his team and products being launched over the next couple of quarters. So.
For all collectively we're we're working real hard on that area. It's important to also of the business was important for the the climate and the world that we get this right and so we are really embracing this hard and get in front of it as I think we did a couple of years ago for the advisors, who want to continue to be in front of them. Thank you.
Thanks on that and.
And maybe just on TLC.
Suddenly closed is there any notable update.
You know what that transaction.
Since the close it.
Great question. So early days, but really can continue and be really excited and pleased and.
First of all Super team teams that we brought in in terms of adding to our investment talent across a lot of our boutiques and and and as I mentioned.
Standing up a separate large separate kayne equity boutique and that has institutional quality of the early days Robin could discussions of Cam institutional investors with that boutique and then of course.
The but the the other two principal advantages of the of the GLC asset management acquisition. A was the fact that we Mckenzie and hour are gainfully working closer with kind of like wealth business, and Canada, which is growing very nicely that we can again and look for ways that we can.
Growth out with new ideas and products, that's sort of where those two that as of early.
Early day is going very well in terms of of the dialogue and the planning and then the group retirement marketplace, which is a growing marketplace and Canada as we know and we Mackenzie had de Minimis exposure there prior to the GLC and now.
I would I would say that the.
The reception has been very positive.
Institution institutional consultants or the intermediaries for a lot of those clients, but they.
<unk> been fine with the transaction and a little bit of a wait and see for a couple of quarters, but that's gone very well and we probably should be proactive on that and that channel over the over the coming quarters.
And once everything has been settled down in terms of the changes to the organization that the of ethics all of those saw and now they are fine with that so.
And all Green lights, right now for us to get going on to new channels and again very happy with the the teams coming in and of the new investment professionals. So there's just a terrific team and they fit very nicely culturally and the Mackenzie.
Alright, Thank you very much.
Welcome.
Once again, if you have a question. Please press Star then one.
Our next question comes from James <unk> of National Bank Financial. Please go ahead.
Yeah, Thanks, and good morning.
And my question is on the <unk> the high net worth segment, and and mass affluent segment and the disclosures around the high profile managed solutions.
And it looks like a really solid performance. There is there is there anything you can tell us about the the growth in that the <unk>.
Mobile solutions product.
And what's the uptake from high net worth and mass affluent clients.
In terms of of the gross sales of their generating and and.
And what are you expecting out of this product going forward.
Yes, so the growth of the statement by the way the the growth and the high profile product has been substantial over the last.
<unk> or for years.
Our approach and I V.
As to really embrace.
Constructed managed solutions. So we have over 80% of our flows are directed there.
And we foresee that continuing.
And and for the mass affluent high net worth segment I profile, which is it's really a makeup of three different types of of.
And of solutions there is the high profile pools, there as the high profile of portfolios and then there is the new discretionary profile model.
So the most money is and is in is and the pools.
And over $20 billion the portfolio started last year and we just we're approaching $2 billion in and those and then the discretionary model portfolios as I said just started so we expect that to continue to grow.
We fully.
Of nature that we've designed these things to be.
Very receptive to those types of markets that we want to make sure that we grow our R. R.
<unk>.
Great and is it the new.
New clients coming to the platform that are.
And that are driving that growth or is it existing clients shifting some of their money from other out of there on that.
The profile.
It's actually both of them.
So we've done a great job of.
Working with our existing clients and making sure that they are aware of the benefits of leveraging the high profile and.
One of the reasons why we've got.
We're very excited of our increasing share of wallet with our existing clients.
But it's also a and a huge driver of our ability to bring on new clients to the organization. So both share of wallet and new client acquisition has been key for us and they will continue to be key for us going forward and then it has helped us bring the new advisors.
And our experience and the industry didn't want to focus on financial planning and want to rely on well constructed data solutions to join our firm as well.
Okay, that's great.
Shifting to the comments around the around China, and the attractiveness, there and recycling some of the capital from wealth simple is the is.
And this is the view right now that the the most attractive option is the one you have with China AMC on there are other opportunities in China that.
And that that could we could see that capital and get recycled and deployed.
Yes.
I appreciate the question, but I would say we have not.
Landed on what the optimal deployment of the.
And this dry powder is.
<unk>.
I mean, China AMC as I said as an asset.
Very much like and would be open minded to owning more of.
But I think as I said earlier, I think as the world, Reflate and and confidence and boardrooms builds and builds.
We're going to see a very active M&A environment, generally and I expect a lot of wealth platforms and asset management platforms to potentially.
Become available so.
Hi.
We are very open minded as to.
And how this capital will get will get deployed.
Okay, Great and then last one and just maybe more of a of the.
Macro view Indus.
The industry as a whole is obviously doing very well from a net flow perspective.
I think there's some underlying macro of clients that are helping to drive that but.
And what are what are your overall views on that and the sustainability of the rack.
The industry net flows.
You know at least over the near term.
And it's Barry Great question.
And so certainly we're seeing record flows and the industry and.
That's a good thing obviously for all of us and particularly <unk>.
As we gain market share.
It's is we think this can go on for a little while now I mean this can't go on forever as trees can't grow of the sky as they say, but if you see the to your point the macro forces first of all if interest rates.
All of the central banks for signals, particularly in Canada, United States, and Europe, and elsewhere and interest rates will be low for some for quite a while at least for a couple of years and.
And and the central banks are as we know are really focused on the.
The economic recovery and jobs and appointments and probably more so and I never have and so they're going to be a little more of <unk>.
Comedy of our patient rather to raising rates until we see those signals come back and even of James' point, where even reflation and they know the central banks have changed their posture on inflation.
Not so much the target, but also for probably more of on average and so as if inflation does kick up transitory wise above those targets the.
They will get and be patient with it because it.
Just to ensure that that kind of recovery is there and the shops for their so interest rates remaining low.
The equity markets of course been bolstered by macro forces with fiscal stimulus, but also obviously, there's a broader array of companies that are of thriving in this environment. Some industries are still not and and that's unfortunate and as.
And some folks are so.
Disadvantage with the sort of COVID-19 environment, but.
Kris the amount of of companies are thriving and so the corporate earnings as you've probably seen coming in and there are strong and Theres No reason why and you've seen some of the large financial institutions and kind of nice data points of the fact that might go on for a few years going forward. So when you have that environment, plus obviously oh.
And the average citizen and being a little more careful with their spending and therefore that money going in the savings that is a that is a favorable environment for well for the asset management and industries and so we were not going to put up the.
Uh huh.
A point of a prediction as to when that might subside subside, but it's not a one quarter phenomenon. This could go on for quite some time. So we're here very focused all of US just to take advantage of it gained market share and a growing market. That's a nice combination.
But first and foremost obviously just focus on providing great great advice and great returns for our clients, but a great question don't have the crystal ball, but it's it's a it's certainly a robust environment now for the industry.
Thank you very much.
This concludes the question and answer session I would like to turn the conference back over to Mr. Potter for any closing remarks.
Yes. Thank you everyone for joining the call today, we certainly appreciate the broad set of of engaging question.
And with that I hope you all have a good weekend and we'll end the call.
Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yeah.