AGF Management Limited

Thank you, operator, and good morning, everyone. I'm Adrian Basaraba, Senior Vice President and Chief Financial Officer of AGF Management Limited.

Today, we'll be discussing the financial results for the second quarter of fiscal 2019. Slides supporting today's call and webcast can be found in the Investor Relations section of agf.com.

Also speaking on the call today will be Kevin McCreadie, Chief Executive Officer and Chief Investment Officer. For the question-and-answer period with investment analysts following the presentation, Judy Goldring, President and Chief Administration Officer, will also be available to address questions.

Turning to Slide 4. I'll provide the agenda for today's call.

We will discuss the highlights of Q2 2019, provide an update on the key segments of our business, review our financial results, discuss our capital and liquidity position, and finally close by outlining our focus for the remainder of 2019. After the prepared remarks, we'll be happy to take questions.

And with that, I'll turn the call over to Kevin.

Thank you, Adrian, and thank you everyone for joining us on today's conference call. During Q2 of 2019, we continued to execute against our strategy and stated goals.

I'll begin today with some highlights. We made a number of enhancements to our product suite.

In April, we repositioned two of our existing funds to launch the AGF Global Real Asset Class and Fund, and in May, we introduced two U.S. listed AGFiQ ETFs.

Our private alternatives AUM reached $2.2 billion, which is solid progress toward our goal of reaching 5 billion by 2022. We remain on track to meet our SG&A guidelines of 190 million in 2019, even as we invested in growth areas.

AGF was a finalist at the annual Wealth Professional Awards in four categories this year. CEO of the Year, Fund Provider of the Year, Employer of Choice, and Advertising Campaign of the Year.

And we reported dilutive adjusted earnings per share of $0.14, which is 17% higher than the prior year after adjusting for IFRS 15. The Board also confirmed a quarterly dividend of $0.08 per share for the second quarter.

Starting on Slide 6, we will provide updates on our business performance. On this slide, we break down our total AUM into categories disclosed in our MD&A and show comparisons to the prior year.

AUM ended the quarter at $38.3 billion, which is flat to the prior year. Institutional, sub-advisory and ETF AUM decreased by 9%, compared to prior year, driven by their committed redemption which was previously announced.

Private alternatives AUM reached $2.2 billion driven by our latest funds, which raised considerable capital from institutional investors in Canada, the United States, Europe, and Asia. The fund will add more commitments later in the year and is expected to reach final close sometime in 2019.

We are pleased with the progress in growth of AGF’s private alternatives business. The growth in infrastructure AUM reflect strong investor appetite for middle-market energy, utilities, and civil infrastructure opportunities in North America.

Turning to Slide 7, I’ll provide some details on retail business. Consistent with the last few quarters, retail industry conditions have remained challenging.

For the past 12 months ending May, the Canadian mutual fund industry reported net redemptions of $12 billion, compared to net sales of $32 billion in the prior 12 months. Retail investors are largely remaining on the side lines in anticipation of further market volatility.

For the recent RRSP season, deposits and GICs gathered $23 billion of assets, which is more than double the amount of assets gathered by long-term investment funds. In this challenging backdrop, AGF’s retail fund business, which excludes net flows from institutional clients invested in mutual funds reported net redemptions of 169 million for the quarter, compared to net sales of 85 million last year.

AGF’s reported mutual fund net redemption in Q2 were $498 million, which includes net redemptions of $329 million from an institutional client invested in our retail mutual fund series. This client made an asset allocation decision based on the current interest rate environment, which resulted in a redemption.

We know AGF remains the clients preferred vendor for this specific strategy. Over time, mutual fund industry sales ebb and flow and we don’t believe the current industry weakness is necessarily a secular trend.

We would anticipate that industry sales bounced back with investor sentiment, particularly with significant cash sitting on the sidelines. Over the short term, however, we are cautious about the sales trajectory until we see sentiment becoming more positive heading into the fall.

The ETF industry sales have been strong. As we anticipate further growth, we have developed products to suit investors future needs.

We launched two new U.S.-listed ETFs to expandour presence in the U.S. both funds leverage AGFiQ, our quantitative and factor-based investment platform and provide investors with access to alternative asset classes and investment strategies.

We will continue to focus on executing our resale strategic priorities, which include developing new strategic relationships and capitalizing on our existing partners. Supporting advisers in both the IIROC and MFDA accounts and providing innovative products and solutions around specific needs.

Turning to Slide 8, I will provide some details on investment performance. As I have stated previously, our long-term target is that 50% of our AUM above median in any one-year and 60% of our AUM above median over three years.

As of May 31, our AUM above median was 49% in one-year and 21% over the trailing three. The one-year performance number has significantly improved due to our quality bias, which is the result of a disciplined risk management processes.

For much of 2018, such investments underperformed relative to securities with strong momentum characteristics. This negatively impacted our three-year performance target.

We are comfortable with our positioning and believe that quality inherent in our portfolios is appropriate for investors over the long-term. As of May 31, 71% of our Canadian ETFs with two-year track records are ranked above the medium and as a reminder, we enter the Canadian ETF marketplace in January of 2017.

In the U.S., where we now have a line-up of seven ETFs, our Anti-Beta ETF is ranked in the first percentile on a one-year basis. We are seeing increased interest in liquid alternative products and our sales team is focusing their efforts on educating investors on effective ways to use these tools in their portfolios.

With our seven-year track records in U.S., we are very optimistic about impending – our impending launch of these strategies in Canada as a way to manage portfolio risk. Moving on to the institutional side of the business, not including retail sub-advisory and ETFs, those were essentially flat for the quarter.

As was disclosed in our MD&A, we have 1.4 billion in committed redemptions for Q3. The redemptions were largely a result of a partner's repositioning their platforms and internalizing investment management capabilities.

Although we are disappointed by these redemptions, we continue to focus on developing new strategic relationships and partnering with organizations that have open platforms. RFP and related activities have remained strong with interest in our AGFiQ, global equity, Global Sustainable Growth Equity and emerging market strategies.

We feel confident about our ability to continue to generate gross sales. With that, I’ll turn the call back over to Adrian.

Thank you, Kevin. Slide 9 reflects the summary of our financial results for the second quarter with sequential quarter and year-over-year comparisons.

For ease of comparison, we have included adjusted numbers and also restated prior period results for IFRS 15 throughout the remainder of this presentation. We recorded total revenue of $110 million in Q2 2019, which is a 5% increase compared to Q1.

The increase is mainly due to the following: Higher management fees, which were driven by higher average AUM, we recorded management fees based on total AUM, excluding the private alternatives business; higher profit from associates and joint ventures, this includes our proportionate share of the net income of Smith and Williamson and net income from our share of management fees earned in the private alternatives business. As our alternative platform gains scale, including the final close of our latest fund, more significant management fee earnings will be recorded.

These revenue increases were probably offset by lower fair value and other income. This includes income from – related to mutual fund fee investments, and alternative LPs.

Income from these LPs such as Stream and the Essential Infrastructure Fund includes cash earned from monetization of assets, ongoing cash distributions, non-cash increases or decreases in value and accruals for payment of carry. As a result, fair value and other income can vary quarter-to-quarter.

Moving on to SG&A, adjusting for IFRS 15 our expense guidance for 2019 is $190 million and we remain comfortable with that guidance. Q2 SG&A was $48.6 million roughly in-line.

We have not provided formal guidance for 2020, but we have indicated that we anticipate a further expense decrease in 2020, which could see expenses coming closer to the $180 million range. More work is required by management to position ourselves to execute on the 2020 expense efficiency program, even before commissions margin is 26.6% for the current quarter, which has improved compared to 23.1% in Q2 2018.

Turning to Slide 10, I’ll walk through the yield in our business in terms of basis points. Slide shows our revenue, operating expenses, and EBITDA before commissions as a percentage of average AUM, the current quarter, as well as trailing 12-month view.

Note that AUM and results from Smith & Williamson, private alternatives platform, one-time items and other income are excluded. The revenue yield in Q2 2019 is 111 basis points, 2 basis points higher than the trailing 12-months.

The improvement has been partly driven by shift in sales towards our stand-alone products. Our international equity funds such as AGF Global Select and AGF Global Dividend have long track records and are gaining close.

Going forward, assuming normal business structure resumes, we expect net revenues to decline approximately 2 basis points per year on total AUM, excluding private alternatives simply because sales generally go into funds with lower fees as compared to redemptions, which tend to be in funds with relatively higher fees. We will continue to monitor this.

Even before commission yield was 22 basis points, 1 basis points higher compared to the trailing 12-months. Turning to Slide 11, I’ll discuss free cash flow and capital uses.

This slide represents the last five quarters of consolidated free cash flow on a trailing 12-month basis, adjusted for one-time items as shown by the orange bars in the chart. The black line represents the percentage of free cash flow that was paid out of dividend.

Our trailing 12-month free cash flow was $54 million and our dividend payout ratio was 46%. Taking into account extremely essential infrastructure fund, as well as our additional 75 million committed to the alternatives platform announced in January, our total remaining capital commitment to the alternatives platform is approximately $89 million.

Capital commitments may be funded from excess free cash flow, but keep in mind there is also going to be further recycling of capital as monetization’s occur, which will help fund future commitments. We also have our credit facility available, which provides credit to maximum of $320 million.

The total amount drawn now stands at [166]. Turning to Slide 12, I’ll pass it over to Kevin to wrap-up today's call.

Thanks, Adrian. During Q2, we continue to make progress against our stated objectives.

Our profitability margin has improved and going forward continued growth and further efficiency initiatives will contribute to working further towards our targets. We made enhancements to our product line to meet investor demands for our alternative asset classes and investment strategies.

Our private alternatives AUM reached 2.2 billion furthering our goal of reduced scale on this platform. Along those lines, I like to reiterate our primary goals for the remainder of 2019.

First, we continue to target above the medium investment performance. In addition, we wanted to improve the trajectory and retail and institutional close, while continuing to leverage the AGFiQ platform to establish this unique capability in the areas of quantitative investing, ETFs, and liquid alternatives.

Additionally, we like to position the firm to reach 5 billion in private alternatives by 2022 and meet our SG&A guidance for 2019. I want to thank everyone on the AGF team for their hard work.

We will now take your questions.

Hi, good morning. I just had a few questions relating to the Smith & Williamson investment.

And I just want to understand, I guess you'd be buying it from another shareholder. And then do you have a rough timing on when the purchase would close?

Yes. Geoff it’s Adrian.

In the run-up to the IPO there could be some events that protectively dilute our ownership and we have certain protections in that regard and we’ve chosen to exercise them. And we don't have a specific date for when that transaction will occur.

Okay. But is this like an issue of new shares that you're buying to keep your pro rata ownership?

Or is this another shareholder that's selling?

It’s basically treasury shares to keep our – to potentially keep our ownership stable.

Okay. And then my second question was just on the valuation.

It looks like FX adjustment was around GBP7.85 per share. And if you can kind of confirm if that's the right number.

If it's not, what the right number might be because I think last year, the valuation at the end of April was around GBP8.3, I think.

I am not sure precisely what numbers you are looking at, was there a specific page in our MD&A that you could refer us to?

Well, I was seeking the $12 million that you're paying. And I was just trying to do it.

I could say it seemed that you were buying it from another shareholder. Maybe that's the issue because I was going off of what was in the Smith & Williamson report last year in terms of shares outstanding in last year's valuation.

Hi Jeff, it’s Kevin. So, what you get, you have a fair amount of employee vesting that often dilutes a little bit.

And so, this is just a provision that allows us to keep our stake flat at given times. So, there is no external shareholder involved in this.

And the difference you may be looking at might have to do with when we converted that FX rate et cetera, but we can get back on details for you if you want.

Yes. Let me add just like what...

No external shareholder will be involved in the transaction, it’s really employee vesting.

Okay. And then I guess, yes, if you can get back to me on what the implied valuation per share would have been on the transaction.

Yes, we will.

Okay, perfect. Thank you.

Just a follow-on on that. I guess I thought you had sort of determined this was a non-core holding your investment specifically and so why are you trying to keep your ownership position flat and invest in your for further 12 million?

Yes, Graham it’s just basically – think of it this way. We think there's significant value in S&W as it heads toward its public offering.

As we had talked about in the past, the business continues to operate at great high level, and I know people are frustrated a little bit with the time line to that public offering, but we think there’s actually a fair amount of value that can be realized there. So, the opportunity to leaving our stake holding flat actually I think is a pretty good choice for us right now.

Okay. Got it.

Is there any update on timing or is it still just 2020 as a target, but not sure exactly when?

Yes, I mean as we’ve talked before, I think 2020 is the right time frame. There are obviously regulatory approvals that have to happen.

The UK right now is also dealing with Brexit and some other issues. So, on the regulator side, timing is really going to be dependent upon getting all that done, but I'll say what's when publicly disclosed at both S&W and us it should say as 2020 as the timeline.

And then shifting to your alternatives business, can you just remind us what the, I guess your outlook for actual AUM is in 2019, because I know there is a bit of a dynamic between what you’ve committed and deploying capital, I just want to get some confirmation on how you actually anticipate that alternatives AUM trending this year?

Yes. So, we’re at the [2.2] right now.

We’ve got the funds that make up that 2.2. The third fund is in a marketing phase right now and that is about roughly a billion U.S.

just shy of that. Today, we’ll finish out the fundraising on that, probably by the end of the year and now looks to cap out it’s somewhere about 1.2 billion to 1.3 billion U.S.

And then as we’ve talked before, you know our goal is to have a fund in the market every year, year-and-a-half, maybe two. So, I’d say, if you look at the back and of the year, just saying that you get to the [1.2] you are probably looking at AUM that looks at 2.6 billion to end the year, but as we’ve discussed, once we sort of get to the back end of the year, you’ll start to pick up some management fees here for the first time as the platform finally starts to scale, but if we end the year [indiscernible] without doing a fourth fund, you're probably in a pretty good place to get the 5 billion by 2022.

Now recognizing that some of these funds start to recycle capital. So, there will have to be new funds launched along the way to keep pace with that.

Okay. That’s helpful and the management fees as you exit 2019, any visibility on sort of what sort of level we could expect at that point?

Graham you're talking about management fees for our investment management business?

No, in alternatives, I think.

No, just from the alternatives because I know it flows through a different line, just for the alternatives business.

Yes. So, basically the way the management fee earnings work are when you are raising a fund, you don't call management fees effectively in total fundraising is complete.

So, for the subsequent fund that we’ve been talking about and that Kevin gave you the update on – there will be a large call of management fees when the fund does its final close which we anticipate will happen in Q4. At that point in time, you will see the scale of the platform come through and you will see us start to record, fairly significant amount of management fees.

I would say, you can probably count on $2 million or $3 million a year, worth of management fee profits coming from our alternatives business once this fund does its final close.

Okay. That’s helpful.

And then just my last question would be on the ETFs in the U.S., can you give us a little bit of color on sort of what is the distribution strategy there, I think you’ve got two new ones and seven in total. So, how did you get those out to the market?

Yes, thanks Graham, it’s Kevin. So, we’ve had again, platform we have in the U.S., we will start to look a little bit more like our more Canadian platform.

So, the two ETFs we brought in to the U.S. are essentially one of our successful ones here in Canada, which is infrastructure ETF, multifactor.

And the second is really a sector rotation strategy. We’ve adopted a little bit, put a hedge in it for the U.S.

market. But in the U.S., at the base platform really has a seven-year track record and they are essentially market neutral strategies for different factors.

So, we talk about any Anti-Beta. We can talk about momentum market-neutral strategy, size, market neutral strategy, and then the distribution for those is really to gatekeepers, model makers as they plug into a portfolio in terms of how portfolio construction will work for someone using these ETF.

So, if you think about an Anti-Beta ETF, if the market is up a lot, it’s going to be up a little bit, if the market is down, it will be up. So, it acts as an uncorrelated component to a portfolio.

So, the idea to distribute them to, again, model makers, large strat partners. It's really not going to be at that level a ground of adviser sale it’s really going to be a head office down sale by getting them built into a product that is being pushed down from a dealer.

In terms of distribution strategy, we’re actually reworking that right now and maybe Judy, you want to have some color on that?

I think just as Kevin has outlined, we see tremendous growth in the U.S. and so we will be looking to add some hires in U.S.

to support the distribution strategy.

Yes, okay, perfect. That’s helpful.

I've got one more, but I’ll requeue. I don't want to get too greedy.

Thank you.

Thank you.

Thanks, good morning. So, I want to start with a couple of questions on Smith & Williamson as well.

First off, look at the increase in earnings year-over-year, your proportionate share relative to the very modest increase in AUM, it tells me there is probably some efficiencies may be coming from the business or some operating leverage maybe you can speak to that a little bit.

Yes, thanks for the question Paul. The Smith & Williamson business is performing quite well and, you know if you if you look at the time series on the amount that we record through share of profits associated with joint ventures, there is a little bit of variability to it and some of that just had to do with how we’ve recorded from an accounting perspective.

But your quite accurate in pointing out that the business is doing well. It’s profitable and we’re quite happy with the performance of that business.

And then, second question, kind of goes back to what Geoff Kwan was asking about in terms of the valuation behind the additional shares you’re purchasing and my question is more along the lines of, what is the basis of value, what’s the kind of, not what is the price, but what determines the price at which you are able to buy additional shares?

Yes. So, I don't want to talk – we can't really give too many details about the ins and outs of those sorts of transactions because Smith & Williamson is a public company, but what I can tell you is that – sorry is a private company.

So, because of that we don't want to get into too many details, but I can tell you that there is an internal valuation that gets done and any shares that change hands between shareholders is down at that price, so we can’t give you specifics on that because again Smith & Williamson is a private company.

Okay. And then a final question on this topic.

So, I mean you made it pretty clear and Smith & Williamson has made it pretty clear that you’re driving towards the 2020 IPO, is there any thoughts or possibility that it could take a different route before that i.e. you kind of a return to a previous strategy of trying to merge Smith & Williamson with a comparable firm?

Yes, Paul. It’s Kevin.

I mean as we have said all along, I mean there are multiple paths here. And we've stated for a long time now that this asset is non-core.

So, as you would expect that brings in a lot of different conversations at various points in time with, again, as I've said, an end goal being an IPO, but there could be things that could happen along the way for sure. And we're obviously open to those conversations, but right now we’re tracking toward the IPO 2020.

Got it. Okay.

One question on SG&A. In prior years, we’ve typically seen Q2 to be a seasonally higher quarter for SG&A expense, it looks like that won't necessarily be the case in 2019, is there anything – so what explains that and should we assume seasonality and SG&A going forward or is that being removed from how you think about expenses?

Thanks, Paul. It’s Adrian.

I think it’s probably accurate to point out that Q2 can be a seasonally high quarter for SG&A simply because it’s capturing a lot of the expenses that come in at the tail end of the RFP season in retail. But I think there’s a bunch of different trends influencing the quarter-to-quarter SG&A amounts including the actions we’re taking on the efficiency side.

So, I think that’s the sort of masking the seasonality that you may have noted in previous quarters. And particularly as we move down this path of our efficiency in SG&A reduction there is going to be some variability quarter-to-quarter, but again, as I mentioned in my remarks, we’re comfortable with our guidance of 190 million and we're working the expenses down over time.

Okay. But if I think about future year’s, I should assume seasonality reverts kind of how it’s looked historically?

Yes. I think those trends will still be there.

Okay. And then one final question I will sneak in.

Just wanted to understand when you talk about the retail mutual fund flows and the impact from institutional investors, in the past you have talked about the impact from strategic partners, so want to understand a little bit better, what distinguishes between strategic accounts that you’ve referenced and institutional flows that you referenced this quarter? Is there a difference or?

I mean, if you think about – we do have this definition that we’re calling retail mutual funds, and the reason that we have that definition Paul is that we’re trying to give people some insight into the underlying trends in the advisor channel. And so, within our mutual funds we do have institutions that will buy our mutual funds on a Series O basis, and so that definition that I just mentioned it just flows about 5 million.

If you remove those to show that underlying trend, but the legal structure is sometimes not indicative of what the client is. So, we're basically just trying to give you a bit more insight on that.

Paul, it's Kevin. Think of it this way.

We're trying to give you a clean look at what a true retail adviser would be buying by stripping out those which are truly institutions guys.

Understand. So, in fiscal 2018, you benefited from a lot of positive flows from what you referred to as strategic account, are you telling me those were in a different series, those weren’t Series O funds?

That’s just what I'm looking to clarify?

No, I don't [indiscernible] saying that. That definition I mentioned has been applied consistently over time.

Okay. So, institutional investors in Series O could be the same as strategic investors or strategic accounts?

Yes. If we had – we classify it as a strategic account client that put in a few hundred million or took out a few hundred million it would not be the definition of retail mutual funds.

Okay. Maybe I’ll have to circle back with that one.

Thank you.

Yes, absolutely. Happy to do that.

Yes, thanks good morning. Just a question with respect to flows.

I'm just trying to look at where does it – all these AGFiQ ETFs that you’ve got, where are the flows for those going into on Page 10 on your MD&A and then where are those flows on Page 7 of your slideshow as well? Presumably these are all, these should be positive, but I'm just trying to figure out how you’ve categorized on both Page 10 of the MD&A and what you’ve done with them on Page 7 of your slideshow?

Yes. So, Tom the ETFs is probably the easiest to look at Page 8 from our MD&A.

They are basically included on one-line that’s called institutional sub-advisory in ETF accounts AUM. And we don't break out the sales for institutional sub-advisor ETF separately.

They are effectively factored into the change in AUM from period-to-period.

So, are they sold at all to retail?

Yes.

And then, but you don't put them in retail flows. And do you put them in your retail flows on Slide 7?

No. No, we don't.

If you look at, again, referring back to Slide 8, we have pretty consistent definitions and those sales that you see on that, the upper part of that table are mutual funds. The legal structure of mutual funds [indiscernible] mutual funds.

Okay. So, but there is no way we can keep track of the net creations you are getting in ETFs here.

As keep launching these new ETFs, we don't have an idea as to returns of net creations you're getting on them?

Yes. At this point, we haven't disclosed them separately Tom, but I think we'll probably take that and complete that, perhaps we could expand our disclosure in that area.

And how much would be going to retail versus how much would be going to institutional of those?

Our ETFs are primarily sold to retail clients. The U.S.

– Tom, let me just clarify. It may be sold to a dealer who is billing into a model that sold to our retail client.

So, that may be just jiving back to what I said earlier about the U.S. distribution.

There is a little bit different. We don't have a wholesale on salesforce like we do in Canada, Canada is primarily on the retail side.

What percentage, I think is it 7.4 billion you have in this now, is that correct?

No. We're probably between the two platforms [1.5, 1.6-ish billion] in AGFiQ which manages the quantitative strategy.

It’s probably closing North of 6 billion. So, that may be the number you reference.

Yes. I mean, there is a 7.4 billion that talks about AGFiQ in the MD&A.

Okay. And just then as a follow-up, maybe I’ll just take a little bit more of that off-line, but any further disclosure with respect to this growing business would be great.

I think Adrian you talked about two points annual decompression, if you will, going forward. And yet it was up 2 points in this quarter over the last 12 months, can you just reiterate what happened in this and why you still stand by the 2-point compression guidance?

Thanks for that question Tom, because it probably did want some clarification. So, you noted the 2 basis points versus the last 12 months, but if you look at it Q2 2019 versus Q1 we actually had an increase of 4 basis points and as I mentioned that’s driven by increased sales and stand-alone funds.

And if you look at Q4 to Q1, the revenue rate was flat. And I guess one other thing I’ll mention is that, if you look at the redemptions that we’ve noted in our pipeline, those are coming in at a much lower revenue rate than our average.

So, you are actually probably going to see over the next quarter or two our revenue rate tick up a couple of basis points, but we’re going to continue to monitory this, but we still do believe that over a longer period of time, the secular trend from management fees is down, and that’s why we sort of cautioned that our fees could go down a couple of basis points, but again similar to SG&A our revenue rate does not behave quarter-to-quarter, it behaves over a longer period of time. So, we're trying to give you some color in terms of what happened over the last couple of quarters, but reiterating that over a longer period of time the trend from management fees is probably down a couple of basis points a year.

Tom, the other thing I would add to that is, if you look at the industry this year, this is more anecdotal, but usually you see a lot of announced fee cuts, and market still is soft. When we look around the industry, it felt like there was a lot less this year, and as you know we’ve been very disciplined over the last three years about building in pretty significant discipline, but year-over-year, fee cuts end.

I think now we are at a level we feel pretty comfortable, but I think at this point we conservatively think it’s one or two a year.

And what’s driving this secular trend then, everything you seem to suggest is well we bought that trend here and we’re conservative going forward, and we don't see as any my fee cuts going forward, is it just changing mix, is it just as these ETFs grows a bigger portion, what’s driving this secular trend?

So, Tom within our mutual funds, you still have this phenomena of newer funds that we launch, and are selling tend to come up with slower fees and still you have some legacy type product on our books that we’re sold in previous periods that might have slightly higher management fees than newer funds that we’re launching. So, it’s just a bit of recycling of newer funds versus older funds.

Understood. Okay.

And then finally, I think may, might've been a reasonably good month or – and I'm not sure how your flows have been sort of trending just of late?

Tom. I would like, again go back to the comments in the earlier prepared remarks.

If you strip out the wide institutional non-retail stuff, our retail business, our pure retail funds business actually looks a little bit like the industry is better right now. So, we are tracking I think what I've said is, we’re not going to be able to – the industry is having in a tough slot.

We're going to see that as well. But we are not doing anything worse, we’re actually probably in line or better.

I’d say looking at just June, it’s flattish right now, which tells me that the industry to your May data point is improving a little bit, and so we should see some of that as well.

Okay. Thanks.

Hi, just the 1.4 billion institutional redemptions, was that one client or is it several clients and just any color on – what was behind those redemption?

Yes. The majority of it was one client Graham.

And we’ve talked about this with folks which is over time, as large strat partners acquire capabilities in this compressing margin world, you're going to see them try to in-source those capabilities to the extent they can. And we recognize that phenomenon.

To the extent that we've had a heightened M&A activity around this sector, you're going to probably see that. In terms of what's our strategy with the strat account, there has been to moving away from selling things that can be easily replaced into more sophisticated next-generation things in our AGFiQ tool kit where things such as global sustainable or things that will differentiate.

And so, we’re trying to move away from that place, where someone could just swap us out and frankly there is not much about with that. But the majority of that was exactly what you just described.

Maybe the other times we’re a strategic partner we will make a tactical trade so somebody who was in a floating-rate product whose rate is about to be cut is going to want to make a change out of that that doesn't mean we're not going to be their floating rate managers. They're just going to reduce the asset allocation to that.

But the middle one, what I think about with that strategic one, that is going to occur when you have this kind of M&A activity and in a world where everyone's margins are a bit compressed. So, we try to move our strategy away from that, but that was the majority of that 1.4.

Okay. Appreciate the color.

Thanks.

Yes. A quick question.

I apologize if I missed this earlier. But did you – if you didn't disclose it, what was the institutional/sub-advisory net sales number in the Q2?

On pure institutional/sub it was flat.

Flat. Okay.

Would sub-advisory have much in the quarter? Obviously, there's disclosure on the pipeline, but in the Q2 number, was it with the sub-advisory or where you're talking both institutional and sub-advisory?

Yes, we had – in pure institutional I think again, I think of those as sponsors, sovereign, et cetera, was roughly flat in the quarter. On the sub-advisory, we talked about last line there was a client that made a tactical trade on us and that was in O Series.

So that was – again, they still like us [indiscernible] floating rate that’s what it was. It was a large redemption at that is a repositioning in the longer-dated fixed income, which made sense given where we're in an environment.

So that was 300-ish in the quarter maybe a little less on that, but that would disclose last quarter, but that did come out in this quarter.

Okay. And then it would have been nothing additional.

In other words, the $300 million is kind of what was happening for the rest of the quarter within the other sub-advisory relationships. Is that correct?

Yes, that’s correct.

Okay. Thank you.

Thank you very much for joining us today. Our next earnings call will take place on September 25, 2019 when we review our results for Q3 2019.

Details of the call will be posted on our website. Finally, an archive of the audio webcast of today's call with supporting materials will be available in the investor relations section of our website as well.

Good day everyone.