Q1 2023 IGM Financial Inc Earnings Call
Speaker 1: I C qu.
Speaker 2: Thank you for standing by. This is the conference operator. Welcome to the IGM Financial First Quarter 2023 Analyst Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded.
Speaker 2: After the presentation, there will be an opportunity to ask questions.
Speaker 2: To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference over to Kyle Martins, Treasurer and Head of Investor Relations. Please go ahead.
Speaker 3: Thank you, Ariel, and good morning, everyone, and welcome to iGEM Financial's 2023 first quarter earnings call.
Speaker 3: Joining me on the call today are James O'Sullivan, President and CEO of IGM Financial, Damon Murchison, President and CEO of IG Wealth Management, Luke Gould, President and CEO of McKenzie Investments, and Keith Flotter, Executive Vice President and CFO of IGM Financial.
Speaker 3: And on slide five, we provide a list of documents that are available to the public on our website related to the first quarter results for IGM Financial.
Speaker 3: And with that, I'll turn it over to James.
Speaker 3: All right, thanks Kyle and good morning everyone. On slide seven we show IGM highlights for the first quarter, adjusted EPS of 87 cents, another strong result in the current environment.
Speaker 3: We ended Q1 with AUM&A of $260.4 billion, an increase of 4.4% quarter over quarter.
Speaker 3: IGM's overall net flows were $990 million in the first quarter, with positive net flows at each of IG Wealth Management, McKinsey, and IPC.
Speaker 3: IGM Financial was named among Canada's best diversity employers and one of Manitoba's top employers.
Speaker 3: We're proud of these achievements and believe these recognitions demonstrate the focus and investments we've made in our employee experience and significant progress on our diversity, equity and inclusion journey.
Speaker 3: Last and certainly not least, on April 3rd we announced IGM's acquisition of a 20.5% stake in Rockefeller Capital Management.
Speaker 3: which we will begin including in our results next quarter, as well as the sale of Investment Planning Council to Canada Life, which is expected to close later in 2023.
Speaker 3: To reiterate some of what was said on the call in early April , the investment in Rockefeller is a risk-smart entry into the U.S. wealth management market with a meaningful stake in a high-growth company with a management team with whom we have a shared vision.
Speaker 3: Over time, Rockefeller has the potential to drive meaningful learnings for IGM and...
Speaker 3: in a measured way will help shape the future of IGM.
Speaker 3: Turning to slide eight, the first quarter in the financial markets was characterized by volatility.
Speaker 3: Still, Q1 proved to be a strong overall quarter for global equity and fixed income markets.
Speaker 3: an ITM client investment returns averaged 4.4%.
Speaker 3: This marked the second straight quarter of strong gains for investor portfolios, adding to a positive 5.4% in the fourth quarter of 2022.
Speaker 3: Global equity markets continued to gain ground during April . Still, we remain somewhat cautious given the continued macro uncertainty.
Speaker 3: We believe that market volatility will remain an important factor throughout the year, but continue to position our businesses for an improving operating environment later in 2023.
Speaker 3: Turning to slide 9 on the industry operating environment, market volatility over the past 12 months has continued to weigh on industry flows.
Speaker 3: with $4.2 billion in net redemption for long-term funds during the first quarter.
Speaker 3: Industry asset management peers saw net redemptions across equity and balance categories. However, fixed income flows turned positive during the first quarter.
Speaker 3: Turning to slide 10 on IGM's results for the first quarter, net earnings per share of a dollar 60 includes the accounting gain on the partial sale of IGM's equity interest in Great West Life Co. to power corporation of Canada.
Speaker 4: which closed on January 12th.
Speaker 4: Adjusted net earnings per share were 87 cents, down slightly from last year's record-breaking first quarter.
Speaker 4: On slide 11, we highlight earnings across our businesses.
Speaker 4: which did reflect the declines in AUM and AUA year over year for IG and Bihanzi. Our earnings pick up for LifeCo and China AMC reflect the 78 days of IGM's increased ownership in China AMC and decreased ownership in LifeCo.
Speaker 4: I'd also note that we are now reporting IPC as discontinued operations, reflecting the sale of that business to Canada Life, subject to regulatory approval. Turning to slide 12, while the softness in global equity and fixed income markets over the past 12 months have weighed on our AUM and A levels across our operating companies.
Speaker 4: China AMC and Northleaf, as you can see, have both grown their AUM through strong business performance.
Speaker 4: and northerly, as you can see, have both grown their AUM through strong business performance over the past year.
Speaker 4: Slide 13 presents IGM's net flows for the first quarter across IG Wealth, IPC, McKinsey, as well as North Lease fundraising efforts. On slide 14, I'd like to highlight IGM's annual sustainability report released today. We prepare this report for all stakeholders, but also to address the ESG needs of our investors, analysts, and the ESG community.
Speaker 4: We are committed to transparent disclosure and you'll find we include both
Speaker 4: TC, FD and FASB Discloters in our report. Sustainability matters and is important to our business. The appendix of this presentation contains some additional highlights from the 2022 report and I'd encourage each of you to take a look at the full report available on our website.
Speaker 4: I'll now turn the call over to Damon to discuss IG-WELF management's results.
Speaker 4: call over to Damon to discuss ID wealth management's results. Thank you, James, and good morning, everyone.
Speaker 3: Turning to slide 16 in I.D. Wealth Management's first quarter highlights. We ended the quarter with an AUA of $115.9 billion, an increase of 4.6% during the quarter driven by client returns of 4.3%.
Speaker 3: Growth inflows of $3.7 billion, where the second batch first quarter in our history. We achieved our 10th consecutive quarter of positive debt flows at IGWELF with $504 million during the quarter. IGWELF inflows of the percentage of AUA with a past 12 months remain well below the industry and into the quarter at 9.7%.
Speaker 3: while the industry redemption rate was 16.7%. We continue to see strong new client acquisition in high net worth and massive flow in client segments, with inflows from newly acquired clients over $500,000 totaling $442 million in the quarter. Our products suite continues to be strong with 58% of our assets ranked 4 or 5 stars by Morningstar, making it that much easier for our advisors to work with their clients to dollar average cost back into the market in future quarters. www.mooji.org
Speaker 3: rate was 16.7%. We continue to see strong new client acquisition in high net worth and massive flow in client segments with inflows from newly acquired clients over $500,000 totaling $442 million in the quarter. Our products week continues to be strong with 58% of our assets ranked 4 or 5 stars by Morningstar making it that much easier for our advisors to work with their clients to dollar average costs back into the markets in future quarters. Here is slide 17.
Speaker 3: You can see our Q1 2023 flows were solid in the context of a challenging first quarter across the industry. As a reminder and to put April results into context, March and April are months in which our advisors put significant focus on working with their clients on tax planning and optimization.
Speaker 3: which traditionally makes these months weaker seasonally. Paperfuls were also influenced by tax payments by a high network client.
Speaker 3: As our advisors focused on tax planning this year, the environment was vastly different than last year for a period.
Speaker 3: Number one, continued uncertainty and volatility fatigue was front and center reinforcing the importance of having a financial plan. And two, client assets and short term solutions remain elevated as they're being paid to wait.
Speaker 3: Given the current market environment, it is natural and prudent for advisors to build short term positions and to dollar average costs into the markets over time.
Speaker 3: A short-term money is redeployed as a function of our clanks, executing their financial plans.
Turn it slide 18. I'll reiterate that in Q1 we achieved the second best growth inflows in our history at $3.7 billion and our net flows remain solid.
I'll remind everyone.
So we are looking at a very tough comparable in Q1 2022. That was our best Q1 in our history and a quarter that was riding vastly different tailwinds in terms of operating environment.
In Q1 2022, we illustrated what success could look like in a strong market environment. Well, in Q1 2023, we're illustrating the strength of being there and helping our clients navigate turbulent markets and maintaining focus on their long-term financial plan.
We continue firmly believe that we are winning market share through new coin acquisition in greater sure of wallet with our 12-month debt flows rate of 1.6% to end the quarter. Slide 19 provides clear contact of the current operating environment.
We have sustained higher redemption rates in the industry and a substantially low rate at IG wealth management as our clients were made committed to executing their financial plans even during these markets of volatility.
I do well last 12 month gross health was rate of 9.7% remains low relative to the industry and the overall industry redemption rate for long term funds on the other hand remains at 6.7% at the end of the quarter.
The early wealth last 12 months gross outflows rate of 9.7% remains low relative to the industry and the overall industry redemption rate for long term funds on the other hand remains at 6.7% at the end of the quarter. Turn to slide 20. The early wealth last 12 months gross outflows rate of 9.7% remains at 6.7% at the end of
We demonstrate our success in new client acquisitions, particularly with clients with assets over $500,000.
We have $42 million in growth inflows from new acquired clients who over $500,000 will represent a 142% increase over the past five years. Of note again, this quarter growth inflows from new acquired clients with over a million dollars represented 24% of the new acquired clients during the quarter.
of slightly from Q1 of last year in significant increase from the 13% in Q1 2018.
This remains a testament to our client, our strong client value proposition, our ability to execute a high network strategy, especially during the current market environment.
Turning to slide 21, this represents the productivity of our advisors. Both our newer advisors and more experienced advisors practices are continuing to deliver strong productivity numbers as measured here by growth inflows per advisor.
We have undertaken several initiatives over the past five years to drive productivity gains and extend continued momentum in future quarters.
taken several initiatives with the past five years of drive productivity gains and expense continue momentum in future quarters. Now to slide 22.
I'd like to highlight the strength of our best and show.
58% of our assets have a Morningstar rating of 4 or 5 stars, while 88% have a Morningstar rating of 3 stars or better.
We continue to work with world class asset managers as we build our investment capabilities.
Our investment strength and performance provides strong backing for our bodies as we work with our existing clients to put their cash to work in solitude, new, massive fluid high-neighborath clients to bring to the firm.
I'll turn the call over to Luke. Thanks, George. Thanks, David. Good morning, everyone.
First of all, to comment over the last number of days, we became aware that through a cyber incident with one of our suppliers that certain personal information of our clients was exposed. The supplier is investor-con, who may give many wealth and asset managers use for printing and delivery services of client materials. The incident and investor-con relate to an incident with one of their software providers go anywhere, which is at a lot of publicity.
For our investigation, we determined that exposed information included name, address, and social insurance numbers.
Importantly, financial information like client holdings that account balances were not exposed.
Holdings in the Kenzie funds were not impacted in our systems have not been compromised. And importantly, we have no evidence of any misuse of any client data at this time.
We immediately took appropriate actions to be there for our clients and advisors and dealers. We stood up a separate contact center and commenced outreach to notify all impacted investors and the dealers and advisors to serve them. We've offered comprehensive credit monitoring and identity theft insurance to all impacted clients, and we've worked with the vendors to ensure that the environment is safe and to ensure that something like this does not happen again.
We stood up and rolled out to support our clients or last number of days. And we're going to continue to do everything we can to support our clients, advisors, and dealers over time.
Turn to page 24, a few comments in the quarter.
As it's brought up by 3.8% in the quarter driven by continuing strong client investment returns, as said by James and Damon, this quarter clients earned 5% and this follows 5% during Q4.
As James reviewed earlier, investor confidence is not yet returned to the industry, but importantly, we've seen industry grow sales, redemption rates, and net sales stabilize during the quarter. You have to walk before your run, and these are good indicators that should both well for the back half of the year of Trent continue. During the quarter, McKenzie Gain Market share with investment fund net sales is 72 million.
with the industry being up 5% and a bolster China MC ranking of being second largest in the Chinese domestic mutual fund industry with a 4.6% market share.
and Northley continued to average around a billion dollars of new commitments during the quarter with 800 million commitments diversified across ASCIC losses.
On page 25, you can see our investment fund net flows and the trending. And as mentioned on the right, you can see the net sales stabilizing with solid retail net sales results in February and March.
This is encouraging. We have a very engaged sales organization and we have strong demand in the period across the number of our boutiques that supported these market share gains. This includes green chip, global equity and income, blue water and fixed income.
On page 26, as mentioned in the top left, we had retail gross sales down around 21% relative to industry peers down 26%. So we had sales capture rate gains and we've begun to see gross and net sales stabilize. You can see this in the last 12 month trailing chart at the bottom left.
I'd remark on the bottom right you can see the percent of our AUM and 4 and 5 star funds declined to 44% at March relative to 57% in December .
We're feeling very good about investment performance right now across our boutiques and I comment that a meaningful part of the decline is due to move to 3-star on one series of our two Blue Water flagship funds due to it having an exception date that anchors to the three-year performance. The F&A class ratings on these two funds are 5-star and 4-star respectively and the one-year, five-year and ten-year are strong first course.
A few comments on page 27 that shows investment performance and net sales by boutique. Under the asset weighted percentiles near the middle of the page, you can see that the last six months and the last year have been very good across most boutiques. I'd also call out that North American Equity, Bluewater, Greenship, Global Quad and Global Equity in income and fixed income all have very good
On the previous slide, I highlighted that our Green Ship Boutique, which is focused on thematic investment to combat climate change, is our current top selling boutique.
On the left-hand side of the slide, I'd highlight that you can see we introduced our 2022 Sustainable Investing Report during April and it's available to you on our website. And I note that we had a number of events and content in the second quarter focused on education around sustainable investing.
On the right, we launched the McKinsey Corporate Knights Global 100 Index ETF and Mutual Fund two weeks ago, and we rang the bell on the exchange. As highlighted last quarter, this index invests in the 100 most sustainable companies in the world as assessed by Corporate Knights.
We believe this index is such a compelling investment product as it diversifies by industry by design and you can see as a consequence on the right it tracks very well to the MSCI All Cap World Index.
We believe the investment thesis is clear. Responsibly run businesses are consistent with shareholder value creation and you can see that it has a very strong track record over its 18 years of history. Training page 29, I'd highlight continuing growth in Chinese mutual fund industry assets, up 2% in the quarter and 7% in the year.
During the quarter net sales were driven by money market funds and there were slight redemptions of long term funds.
Growth has been very robust throughout the last three years, and we expect us to continue as trying to continue to emphasize growth in the retirement system.
On the right, I highlight that China MC's position remains very strong as the second largest fund manager in terms of long-term funds.
Their market share increased year over year from 4.3% to 4.6% within a very robust market.
Turning page 30, you can see China's use growth in AUM over time. Total assets are now 1.77 trillion one or $350 billion Canadian dollars. Total assets were up 11% your year and long-term mutual funds assets were also up 11% in the same period during my strong net flows.
I note that sequentially and year over year for both money market and long term funds, China MC's AUM growth rate has been double that of the Chinese industry as shown in the previous slide reflecting very good market share gains.
And on page 31, you can see continued strong fundraising of $0.8 billion in Q1 2023 at Northleaf. Fundraising continues to be diversified across private credit, infrastructure and private equity offerings. And I'd also highlight, Northleaf's averaged about a billion dollars in fundraising during each of the last nine quarters since we've been in our partnership with them and acquired our stake. So please, with your ongoing success.
I'll now show the call over to Keith Bader. Great, thank you Luke and good morning everyone. On slide 33 you can see our AUM&A. The chart on the left shows ending assets were up 4.4% during the quarter driven by investment returns.
With the sale of IPC to Canada Life, it is now classified as discontinued operations and presented in our P&L as a single after-tax line item. And we have correspondingly adjusted our presentation relative to prior quarters.
And you can see the chart we have added a line for AUM&A excluding IPC, which we'll tie into the next two slides.
Slide 34 shows quarterly EBIT in millions of dollars on the left and has a percentage of AU M&A on the right. I have two comments for the left chart on adjusted EBIT. First,
Net wealth and asset management fee revenues are flat in Q1 relative to Q4, primarily from higher advisory and product and program fees at IG, offset by lower other financial planning revenue. Second, we had a small sequential increase in expenses between Q4 and Q1.
Now, we're partly seasonal related. There are SPCs and as well as compensation adjustments for employees, which take effect in the new calendar year. On the right, you can see adjusted EBIT margin is down slightly versus last quarter. And that's due to the point I just mentioned. Turning to slide 35, we have our consolidated earnings at IGM.
We had another quarter of a higher net investment income, another of $11 million, which is driven mostly by interest income earned on cash and from favorable seed capital, Mark of a Kennedy, which accounted for 3.4 million of the total.
Second, we had an increase in proportion to share of associate earnings year over year. This was driven by higher contributions from China AMC, partially offset by reduced contributions from the Great West Life Co. As a reminder, China AMC and Life Co share of earnings were correlated this quarter based on the January 12 closing of the transaction. Also a note.
For 2023, Great West Life Co. we will be reporting results after IGM, and we are now recording our proportion share of your first earnings based on Alice consensus, with a true up based on reported earnings in the following quarter, and we will complete three statements related to life post transition to April 17 and our Q2 results.
1.3 operations and support business development expense combined decreased 1.1% year over year. This is partially due to lower business development expense at IG. Also, if you recall at this time last year our expense guidance was 5%.
It was after the first quarter where we focused on additional expense management initiatives. So the efforts in Q2 through Q4 last year set us up for lower expenses in Q1 of this year.
Excluding IPC discontinual operations, our full year expense guidance remains at no more than 3% growth. And having said this, we are assessing opportunities to manage our expenses further, balanced with continued investment in the business. And lastly, our dividend payout rate on the last 12 month basis is 74% of the cash earnings. Turning to slide 36, you can see a summary of IG Wells AOA.
and the key revenue and expense rates. On the top right our advisory fee rate is up 0.4 basis points quarter over quarter driven by higher interest spread on client cash and offset by a mixed shift of clients rate bands due to strong Q1 client returns.
Going forward, we continue to expect downward pressure of about 0.5 basis points per quarter from a mix shift as we acquire high network clients. And the rate will also continue to be impacted by a mix shift in client cash balances, the spread of these cash balances as well as other short term products.
Acid-based compensation rate is down 0.6% in the quarter, as due to an annual reset in our advisor qualification tiers, and we have A-way increases in assets with lower rates such as GICs, cash and he says.
As I've commented in the past, we continue to expect moderate upward pressure on the rate from maturing DFC units until the end of 2023, at which time the units will have matured and the rate will also continue to be impacted by the mix of cash and other short term products. On slide 37, you can see IG's overall earnings.
of 104.6 million is down 11% relative to Q1 2022.
primarily due to lower average AU M&A and the impact it had on revenue, as well as $14 million in lower contribution from other financial planning revenue.
The mortgage business was the primary driver just from lower volumes, lower interest margin, and unfavorable accounting marks on our securitization structures, but we also had a lighter quarter of insurance and insurance and banking.
percent year over year. This is driven by lower pension and discretionary spend and some lower field programs.
Moving to slide 38, you can see Mackenzie's AUM by client and product type, as well as net revenue rates. On the right, focusing on the blue line, you can see the net management fee rate for third-party clients, including Canada Life at 80.8 basis points.
And this was relatively in line with what we communicated last quarter. It just does a reminder we have two fewer days in Q1 upon which we charge a revenue. However, our asset-based compensation paid its distributors and advisors is based on one quarter of the year. And that's how the negative impact on our revenue rate in Q1 is it has in past years. Turning to slide 39, you can see McKenzie earnings of 48.4 million is and we also want to branch in on the upper left.
Slide 40 has China EMC results on the left. Total EOM was RMB 1.77 trillion, up 11% from last year and up 3% quarter to quarter. With respect to earnings on the right, Q1 2023 earnings were up 11% relative to Q1 2022, adjusting for the increased ownership stake.
and timing of closing. And just to be clear, China MC's share of earnings were pro-rated this quarter based on the January 12th closing of the transaction.
During the quarter, China MC also declared an annual dividend of 69.2 million, reflecting our 27.8% interest, and this represents a dividend payout ratio of 60%. On slide 41, for those familiar with the slide, we have adjusted the format to incorporate the pro forma view, including Rockefeller, while maintaining all the other details.
of the acquisition, including financing costs, to be approximately negative 20 to 25 million, primarily driven by transaction financing of approximately 20 million, and the remaining estimated proportion, proportion share of RGM earnings, including amortization of intangibles.
For Q2, it's a reasonable assumption the financing cost of start-dune second and have one month impact on the quarter.
Second, on Northleaf, our proportionate share of earnings of $4.1 million were up 21% from $3.4 million last year. And as a reminder, Q1 earnings including incentive fee income and we continue to expect quarterly earnings contribution from Northleaf of approximately $3.5 million per quarter.
On slide 42, similar to the last slide, the format has changed but the information provided is no different. We have adjusted the presentation on the slide to account for Rockefeller and the IPC transactions. At April 28th, closing price of $41.58, the implied P multiple for IG.
Wealth Management and McKinsey based on expected 2023 hearings is now 7.6 times. And with that I'll open up the line for questions. Thank you. We will now begin the question and answer session. To join the question queue you may press star then 1 on your telephone.
from Nick Preep of CIBC Capital Markets. Please go ahead.
Okay, thanks for the question. I just wanted to start with the cyber incident there. What are the next steps forward and would you anticipate any incremental investment in systems to better protect against events like that in the future? Thanks, <expletive> and Luke.
Yeah, no investment required. Our systems are all okay. No breaches here at Mackenzie and things are secure. Next steps, we've now finished all communication with clients, advisors and dealers and next step is just to be there supporting them any way we can. Okay, understood.
And then just moving over to China AMC, it looks like long-term fund flows have been negative for two sequential quarters in the Chinese mutual fund industry. How would you attribute that? Or how does that break down by asset class? Is that just a product of recent market volatility?
Guys, it sure is negative. Luke is, but we saw in Q4 and again in Q1, it was actually a fixed income. And with rate increases, there was actually some movement out of that fixed income products. So that's what's driven the O-Plow's per two quarters. And we're viewing obviously the near term, long term, and the intermediate term view is very positive for that industry.
Got it. Okay. And then last one for me, just operating expenses were down slightly in the quarter versus full year guidance, which is positive. If net flows remain in redemption territory for the balance of the year, would you still expect those operating expenses to be up year over year?
Guys, it's Keith here. I think you're referring to Mackenzie and the variable component for the compensation, Nick. Is that correct?
Just a consolidated guidance of 3% growth for the op- on the op-x side. Okay. Yeah. Okay. Thanks for the question. You know, as I mentioned, my comments, when you look back to last year, we really started our expense initiatives in Q1.
And so they had more of the effect in Q2 through Q4. So as we look at the comparative period for Q2 moving forward, it's based on a period last year where we actually implemented expense management initiatives. So you can think about things like natural inflationary pressure that we will feel that relative Q2, Q3, Q4 moving forward relative to last period.
We're also hitting full stride on face-to-face interactions within our businesses as we continue to grow our businesses. And the first comment that we do expect an improved sales environment and variable components and McKinsey expenses moving forward. And Nick it's James. We will look specifically at your question. I follow the question. Let us run the map.
Yeah, okay, no fair enough. That's it for me, I'll pass the line. Thank you.
Our next question comes from Tom McKinnon of BMO Capital. Please go ahead.
Yeah, thanks and good morning. Just another question with respect to the cyber breach. Luke, maybe you can give us the scope of the potential impact on clients. You mentioned that advisors were informed and I assume how do you know that the clients were then informed? What are you seeing with respect to retention or any kind of reaction with...
respect to both advisors and clients and I have a follow-up. Thanks. Great question. So we've sent out communication to all impact of the client directly and we've been working with that with advisors and the dealers who serve them to make sure that they've got line of sight and are fully equipped to engage with clients. So we've now completed all that outreach over the last few days.
So that's all in order. On retention and ongoing activity, we're doing everything we can to rise to this occasion and to be there for clients and to show what we're about and what we're made of and that we're there for them. So right now we're hopeful, obviously, that business continues. And that's what we're seeing right now, and we're going to just keep on doing all we can to help people on this incident.
Okay, thanks. And then just a question with respect to the...
the dividend payout ratio here at 63%. Can you remind us what would be the trigger for an increase in the dividend?
Yeah, well, we've said in the past, Tom, and we continue to say it is that we will assess or reassess the dividend when the pay-rate on a cash basis is at or near 60%. And I think that's pretty clearly at least several quarters away.
Just to add, Tom, the cash dividend pay ratio is currently sitting at 74%.
It's just that, Tom, the cash dividend payer ratio is currently sitting at 74%.
increasing it. Sounds good. Okay, thanks.
Our next question comes from Jeff Kwan of RBC Capital Markets. Please go ahead.
Hi, good morning. Maybe if I can...
follow up on Tom's question on the dividend, just on cap allocation, obviously, you've got organic growth opportunities and M&A that you've talked about, your balance sheet's healthy. How are you thinking about both share buybacks given where the share price today and then maybe asking the dividend in different ways?
Do you think increasing the dividend a bit earlier than the 60% adjusted pay-out ratios you've got might be a lever that might attract additional investor interest, given the dividend itself has been unchanged in the last eight or so years?
Yeah, it's a great question.
A couple of thoughts, Jeff. I guess first on capital, we've deployed a lot of capital. So in this quarter alone, of course, we closed on the purchase of China AMC. We announced the acquisition of Rockefeller and we announced the sale of IPC to Canada Life.
You know, my strong inclination here is to have a period of digestion. By digestion, I mean I think we will be less focused for a period on what I'll call external opportunities.
So I'm quite inclined in that environment to look for opportunities to invest in our businesses, to invest in IG wealth and to invest in Mackenzie.
in particular and so that is something that I'm starting to pay more and more attention to. On the NCIB, I believe our current filing will expire shortly. We have no current plans to renew it, but that is something that we could put back in place on very short notice.
stocks on the Toronto Stock Exchange and for the first couple of days I thought that was wonderful and then a couple of days into I thought well maybe it's not so wonderful.
If I had to point to what IGM Financial needs over some reasonable period of time, I would say it's less dividend growth and it's more earnings growth. And I think if we generate earnings growth, we can clearly grow the dividend over time. But when you think about our investment in China, AMC, and our investment in Rockefeller,
what we're really trying to do in a measured way. In a measured way, it's inject a little bit more growth into this company. And I'm hopeful that if we do that smartly, as the earnings from those opportunities and others that start to surface, then we can get at the dividend and increase it. But I do continue to think that we present to the market.
a very defensive play, a very conservative play with an attractive dividend yield. And all else being equal, what I'd love to do is really try to inject a little bit more kind of thoughtful growth into this company over the next few years.
Okay, no, that's very helpful. And this next question I had was a little bit more for Luke, but happy if anyone else wants to chime in on it. But just a question is whether or not you think the timing of the rebound in industry net sales might take a bit longer this time than, say, prior downturns this century, given interest rates were... How long's it been down previous over the coming six yearswy times, and it helps to
in a continued decline historically, but this time with the increase in interest rates, investors have reasonably decent absolute investment return solutions that they can put their money into, even if it may not keep up with inflation. And if so, does this have any implications?
at the margin how you think about your product lineup. Thanks Jeff, great question. So as you saw in the numbers, think stabilized and we're viewing that as a very healthy indicator and one that we're waiting for and looking for and with again two quarters of strong investment returns.
We've got things moving in the right direction. What we also saw in the first quarter was a big movement back to fixed income funds. And so I'd say when you think about our roster and when you think about the investment fund industry, lots of asset classes, lots of different needs, and what's happened in 2022 is a lot of movement to demand deposits and term deposits and high-interest savings accounts. So when we talk about recovering the back half of the earth to all asset classes, we're already seeing it in fixed income and coming back to fixed income.
in 2021. I don't know if we're going to have that same quilt spring, but we are seeing all the indicators of A, investor confidence improving, and B, a lot of great yield in our investment fund offering for those looking for it.
We're going to have that same quilt spring, but we are seeing all the indicators of A investor confidence approving and B, a lot of great yield in our investment fund or offering for those looking for it. Okay, thank you.
Our next question comes from Scott Chan of Canacor Genuity. Please go ahead.
Good morning. My first question is for Luke. Just curious if there's any update on the new primary partnership. What you're seeing so far, like any fitness and strategy or kind of targets that you talked in the past that might have been impacted and then very...
started this partnership? We had about $100 million in sales for the primary relationships in the corridor. We're out there building relationships with their 7,000 advisors and trying to serve them the best we can. Right now, one of the key measures that we look to, and it's published through IFFIC and investor economics numbers, is our share of their sale activity. Right now, we've broken through 25%, and through our eyes, things are going very good. We're serving them the very best we can.
Okay, that's going to maybe just a little to an orc leaf. You know, very solid net sales trends and to start it and, you know, you start to look at the diversification in all classes and private credit infrastructure and private equity. Is there any anecdotal?
data or performance that like I'm assuming that's the platform is very very strong. Well performance for you to deliver this aspect growth and I just haven't seen anything in the past but wondering maybe qualitatively without numbers if you can maybe kind of describe some of the performance there.
Actually, two of the, so they focus primarily on three asset classes, private equity, private credit infrastructure. I'd say when you look at the origination activity in the quarter and the last few, private credit has done very well and we've also seen some good infrastructure and both of them have very attractive yields. We view private credit obviously it's offloading.
well and we're pleased to see the activity. The other thing I mentioned last call and it's continued into this quarter is in spite of IGM and Great West Life Co supporting North Leaf because they're so relevant for so much of what we're trying to deliver to clients, we remain above 20% of the origination activity or less.
and most of this is coming from third parties, which we also view as very healthy. Okay, and then the last question for James. So, on Capitol Vienna, I'll get a Capitol report. It was 298 versus 197 million last quarter. Just what's most adult to a quarter of a quarter? And then in terms of that, I'll get a Capitol. Can you remind us, do you need a kind of a certain buffer on the...
but we always put a hundred aside. It is up meaningfully a quarter over quarter and that reflects a whole bunch of kind of puts and takes and different parts of our business that consume capital. And I think it gives us, I suppose, it's potentially some fire of power, although I stand by what I said earlier, which is I think we're entering a period.
to be a stronger player still in the high net worth and ultra high net worth segments across now North America. Number two would be to position Mackenzie in the context of Mackenzie being a competitor in a truly global industry. Position Mackenzie for further success within that industry.
And number three is make some money for our shareholders. Those are our three guideposts. Those haven't changed. Those aren't going to change.
So if we look at that unallocated capital number, to the extent we were to start to consume it, I can assure you we would start to consume it consistent with those three priorities.
That's helpful. Thank you very much. Our next question comes from Graham Riding of TD Securities. Please go ahead.
Hi, good morning. Luke, maybe I just touched on the fun performance of McKenzie. You know, you did flag as fall on the below, I guess the industry average for those four and five star. Are you, is there any concern your part that this could.
be weighing on sales or could weigh on sales going forward, you know, once retail appetite starts to come back or, you know, just any thoughts on the overall fund performance.
That's that thanks Graham and that's the man's just not at all if you go to page 27 in the presentation if you're looking at the outside wave percentile.
We've got strength across so many of these boutiques. We've got a really compelling roster. We're strong as we've ever been. And the sales team is very, very engaged as we're in the market right now. And I just highlight one. If you look at Blue Water and many of our boutiques on the three-year number, we actually had a very good March 2020.
We had very defensive portfolios when the pandemic came, and we've lost that moment in time from the track record for somewhere three years. And when I spoke about one of the series in our flagship Blue Water funds that was moved to 3 Star, it's because that series has an inception date that weighted to three year. But if you look through that Blue Water column...
On those two large Blue Water funds, the track work is just exceptional. So we're very pleased, we're very confident, and we're feeling very good about our roster right now. Okay, great. And I think you launched a team, if you will in 2020.
private credit fund last year with North Leeds if I'm not mistaken if that's correct any color answer how the retail uptake has been on that fund for all three of the North Leeds products and the as well as the interval fund this is a long sales cycle so we've got the products in the market we believe they're great diversifiers
for Canadians really enhance risk-adjusted returns and certainly the private credit infrastructure really provide compelling yield and something that's very well suited to an inflationary environment. It's a long education and sales cycle and we're investing with all we got in working with dealers and advisors to make sure they understand the products, they understand liquidity profile.
and that they're actually being placed within Canadian portfolios. So right now the uptick has been low, but the engagement has not been, and we're going to continue pushing with all we've got because we believe these asset classes should be brought to retail and do properly belong in Canadian's portfolios.
and that they're actually being placed within Canadian portfolios. So right now the uptick has been low, but the engagement has not been. And we're going to continue pushing with all we've got because we believe these asset classes should be brought to retail and do properly belong in Canadian portfolios. Okay, great.
being placed within Canadian portfolios. So right now the uptick has been low, but the engagement has not been and we're going to continue pushing with all we got because we believe these asset classes should be brought to retail and do properly belonging to Canadian portfolios. Okay, great.
And then just broadly speaking, James, this is probably for you, but I guess anybody feel free to chime in. Just with industry flows still being weak, is there any evidence or thought that Canadian households are perhaps putting more capital towards de-leveraging, just given the higher interest rate environment and that is...
a factor that's weighing behind that, weighing against investing in funds. Hey, Graham. It's Damon. Yeah, we are seeing clear indications that the clients are taking money off the table and paying down debt given the high level of interest rates. We've gone from an environment where quite frankly, you know, it was...
Shame on you if you didn't borrow because it was free money to a point where now it's quite expensive. So just by the nature of who we are as financial planning shop, you got to make sure that from a cash management standpoint your clients are focused on doing the right things longer term. And having non-deductible interest debt is a huge issue for the industry. So we see that trend continuing as long as these level of interest rates persist.
That's it for me. Thank you. Once again, if you have a question, please press star then one. Our next question comes from Jane Glowing of National Bank Financial. Please go ahead. Thank you.
a little bit more color on perhaps what's driving that outflow on other dealer flows. Yeah, it's Damon here. So you're looking at really a few things. Number one, traditionally in March and April for us are slower months on the sales side just because our advisors do turn their attention to tax planning and optimization with our clients. They're less focused on bringing on new clients.
because of that, particularly at a time right now, you know, just as the previous question was asked just around debt and interest payments. There was a lot of work to be done this year to make sure our clients were in a good position. So, seasonally, we've always, as I said, always had, it's always been a weaker time and then you compound that with the fact that we're in our fifth straight quarter.
of market volatility and noise in the marketplace. And when you go past three, four quarters, you can't be immune to that, regardless of the shop that you're talking about. When you look at the IT business, what I tend to look at is this. And when you look at the IT business, what I tend to look at is this.
You know, we had our second best quarter ever in growth flows in Q1 this year. In 2021, we had our best quarter ever in our history in flows. And in 2022, we had our third best quarter. So the last three first quarters, we've had our best three years in growth flow.
interest rate environment and everything was flush with cash and we had our best year ever. We fast forward one year and let's just call it the end of the bowl.
Higher inflation, but low interest rates. It's the new normal in terms of an operating environment and how you see your clients and prospects. And we had our third best year ever. And then this year, a high interest rate, high inflation.
All tall markets, holding hands, and we hit our back, so when you look at this model, we've proven the resiliency of this model over the last three years.
And to me, I'm very, very confident in our ability to drive this business going forward. Got it. And still maybe for you, Damon, just want to get your perspective. I'm seeing redemption rates that I do well continue to increase. And it seems as if the industry perhaps has plateaued and maybe even turning lower.
Maybe some commentary or color around those two data points and maybe a narrowing of that gap that right now you enjoy a quite sizable gap.
Yeah, that's what I would focus on is the gap. We've always prided ourselves on that gap and the gap continues to remain consistent here. Once again, we're not immune to what's taking place in the marketplace given the fifth three-quarter of volatility, but I will say, you know, once again, we're planners. So we want to make sure we're doing the best interest for clients. So if the clients...
If it's in the best interest for the clients to take money out of their accounts to pay off debt, then we're going to do that. And then number two, something that's changed over the past four years is our ability to be in cash. And when you're talking about bringing on more high net worth clients and your arms around them and your leveraging cash, then you're going to be able to work with them to make their tax payments. And high net worth clients, particularly those that own businesses.
have to pay their taxes in April and early May. So we're seeing that as well. I think that the the the the feature outlook for the for the firm in terms of the redemption. I'm quite confident that we're going to continue to main a strong gap relative to the industry.
Okay, yeah, interesting. Thank you. This concludes the question and answer session. I would like to turn the conference back over to Kyle Martin for any closing remarks.
Thank you Ariel and thank you everyone for joining the call and for the questions this morning. Ariel with that we'll close out the conference call.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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