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 will be discussing the financial results for the fourth quarter and 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 period with investment analysts following the presentation, Judy Goldring will also be available to address your questions.

Turning to Slide 4, I'll provide the agenda for today’s call. We will provide an update on the Smith & Williamson transaction, discuss the highlights of the fourth quarter and fiscal 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 2020.

After the prepared remarks, we will be happy to take questions. With that, I'll turn the call over to Kevin.

Thank you, Adrian, and thank you, everyone, for joining us today on the call. Before we discuss Q4 results, I want to provide an update on the Smith & Williamson transactions.

As you are aware, in September Smith & Williamson and Tilney agreed to merge to create one of the UK’s leading integrated wealth management and professional services group. As we disclosed on Monday, UK’s Financial Conduct Authority or FCA informed Tilney that the proposed transaction structure has not met its approval.

Discussions with the FCA are ongoing to determine the required steps forward. All parties including the management and Boards of Smith & Williamson and Tilney remain fully committed to the merger and continue to believe very strongly in the underlying strategic rationale of bringing the respective businesses together.

It is anticipated that the completion of the transaction, which remains subject to regulatory approval may be delayed. Moving on to Slide 5, we'll discuss the highlights of the fourth quarter and fiscal 2019.

During 2019, we continue to execute against our strategy and stated goals. I'll begin with some highlights.

Pending regulatory approval, the Smith & Williamson and Tilney merger, which strengthened AGF’s balance sheet and provide financial flexibility to focus on our growth initiatives. We committed an additional $75 million to a closed-end fund, managed by InstarAGF, furthering our goal of building a $5 billion private alternative business by the end of 2022.

We continue to drive digital transformation. We are leveraging data for predictive insights to drive engagement and enhance client experience.

We also equipped our retail sales force with an interactive tool that can be used for portfolio stress testing, risk analytics and comprehensive investment proposals for advisors. We launched three liquid alternative funds in Canada to meet investor demands for diversification and non-correlated returns.

All three funds leverage our U.S. team’s long track record of managing similar investments in the U.S.

AGF Global Convertible Bond Fund received a fund Grade A+ award and the AGF U.S. Small Cap Fund that won the Lipper awards for three- and five-year performance.

Our U.S. exchange-listed market neutral Anti-Beta ETF is one of only two finalists for ETF of the year by etf.com.

We recently launched a version of this strategy in Canada, which trades under the ticker symbol QBTL. Our SG&A came in better than guidance.

And due to the efficiency initiatives implemented in the past year, we were able to work our expense base down by $7 million to $189 million during the year. We achieved this even as we continue to invest in key growth areas of our business.

We reported adjusted diluted earnings per share of $0.71 for the year, which is 20% higher than the prior year. The Board confirmed a quarterly dividend of $0.08 per share for the fourth quarter.

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

AUM ended the quarter at $38.8 billion. Mutual fund AUM increased by 3%, and I'll provide more color on our fund business in a moment.

Institutional, sub-advisory and ETF AUM decreased compared to prior year driven by the redemptions that we previously addressed which occurred last quarter. In the current quarter, our institutional business experienced modest redemptions.

We are confident about our ability to generate gross sales within the institutional and sub-advisory segment. RFP and related activities have remained strong with interest in our global emerging market and AGFiQ capabilities.

As of November 30, our global strategies, including Global Dividend, Global Select, Global Sustainable Growth and Emerging Markets equity strategies are all performing above benchmark on a one-year basis. Under Regina Chi's leadership, performance of our emerging markets equity strategy has improved markedly and is quickly approaching the three-year mark, which is key to the institutional channel.

We anticipate strong interest in her strategy from both retail and institutional investors in 2020. For our ETF business, our suite Canadian and U.S.

exchange-listed funds continues to experience growth. Our recently launched liquid alternative funds, which trade in Canada under the ticker symbols QBTL and QUDV, are uniquely positioned to meet investor demand for income and risk management.

Furthermore, our sales team has been able to use these innovative products as a way to attract new clients and gain access to IIROC corner offices. Our private client businesses continued to demonstrate consistent, steady growth with AUM increasing 11% year-over-year.

Our private alternatives AUM more than doubled compared to the prior year, and it's becoming a more significant portion of our business. AUM reached $2.6 billion this quarter due to our latest fund, which raised considerable capital from institutional investors in Canada, the United States, Europe, the Middle East and Asia.

The fund has exceeded its target of US$1 billion size and is expected to do final close in the first calendar quarter of 2020. We are pleased with the progress and growth of AGF's private alternatives business.

The growth in infrastructure AUM reflects 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 the mutual fund business.

Since the spring of last year, negative investor sentiment has weighed on industry flows. For the past 12 months ending November, the Canadian fund industry reported net sales of $3.4 billion compared to net sales of $7.5 billion in the prior 12 months.

Industry flows, however, have showed signs of improvement in the past several months but remain well below 2017 levels. Furthermore, much of the improvement has been driven by banks with independents remaining in net redemptions.

In this challenging backdrop, AGF's retail mutual fund business, which excludes net flows from institutional clients invested in those funds, reported net redemptions of $181 million for the quarter compared to net redemptions of $131 million in the fourth quarter of 2018. In December, we received a redemption notice of $200 million from a client invested in our mutual fund institutional series, which has transacted in January.

The redemption is not performance-related, and the revenue impact is comparatively low at $1 million per year. Looking ahead, while we are cautious about the sales trajectory for the upcoming RSP season, we remain focused on driving the organization to sustainable net inflows.

We plan to do this by developing new strategic relationships while capitalizing on our existing partnerships, providing innovative products and solutions around specific needs and delivering consistent and repeatable investment performance. Before I turn the call back to Adrian, I'll provide a brief update on industry regulation.

In December, the CSA announced plans to ban the sale of DSC and low-load options in all provinces except Ontario. The CSA plans to publish final amendments in early 2020 with a transition period of at least two years.

At this point, we are waiting for further clarity from the OSC on next steps for Ontario. In anticipation of the industry changes, we created a lineup of products that provide our clients with the optionality and choice they require in this evolving investment landscape.

We will continue to work with our dealers to support them in navigating these industry changes. Regardless of the outcome, our business is well positioned to meet the needs of our clients.

With that, I will turn the call back over to Adrian.

Thank you, Kevin. We made a lot of progress in 2019 to position ourselves for profitable growth in coming years.

We performed favorably on SG&A guidance coming in $1 million lower, we plan to further reduce SG&A in 2020. With additional scale from our alternatives LP funds, we’ve recovered our working capital and we'll start recording more significant management fee income from our GP interest in 2020.

Slide 8 reflects a summary of our financial results for the fourth quarter with sequential quarter and annual year-over-year comparisons. For ease of comparison, we've included adjusted numbers and restated prior period results for IFRS 15, throughout the remainder of the presentation.

Q4 EBITDA from continuing operations was $34.6 million, which is $5.6 million higher than Q3, this is mainly due to higher income from Smith & Williamson and timing of SG&A. Please recall for accounting purposes, Smith & Williamson is now classified as held per sale.

As a result, Q4 dividend of $6.9 million was recognized as income and no further equity pickup after September the 18th was recognized. For full year 2019, EBITDA from continuing operations was $120.3 million, $10 million higher than the prior year, mainly due to cost control.

Before I leave the slide, I'll address our SG&A guidance. In 2018 at a time when many asset managers were recording significant expense increases.

We reduced our expense base by $3 million to an IFRS 15 adjusted $196 million. In 2019, we further reduced our expense base to $189 million.

And today we're announcing SG&A guidance of $185 million for 2020. Our achievement and efficiency has come at a time and we're also investigating a significant amount – sorry, investing a significant amount of resources to new and emerging growth areas, including Private Alternatives, global and quantitative investing, as well as ETFs.

Before I leave, just to remind you, our SG&A guidance does not include any acquisitions nor does it include severance related to restructuring and it assumes performance at its current trajectory. Significant improvements in sales or investment performance could result in higher variable compensation.

Finally, the numbers I have provided here are pre-IFRS 16, which I'll address in a moment. Turning to Slide 9, I'll walk you through the yield on our business in terms of basis points.

This slide shows our revenue, operating expenses and EBIDTA before commissions as a percentage of average AUM on the current quarter, as well as the trailing 12-month view. Note that AUM and related results from Smith & Williamson, the private alternatives business, one-time items and other income are excluded.

The revenue yield in Q4, 2019 was 111 basis points, 3 basis point increase compared to the trailing 12 months is mainly due to a true-up of our fund costs. As a reminder, IFRS 15 requires us to net fund costs against revenue, which introduces an element of variability to our revenue rates.

Since the revenue yield can be lumpy quarter-to-quarter, looking forward on an annual basis, we expect our revenue yield to be closer to the trailing 12 month revenue yield of 108 basis points plus 1 basis point or 2 basis point decline over the course of the year due to the natural migration towards lower fee products. Q4 SG&A as a percentage of AUM was 52 basis points, which is comparable to the trailing 12 months.

This resulted in an EBITDA yield of 26 basis points, which is 5 basis points higher than the trailing 12 months. Turning to Slide 10, I will 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 on the chart. The black line represents the percentage of free cash flow that was paid out as a dividend.

Our trailing 12 month free cash flow was $53 million, and our dividend pay-out ratio was 47%. Our total remaining capital commitment to the alternatives business is $79 million.

Year-to-date, we've recorded $16 million of income from our Private Alternatives business, primarily from LP investments. To support our Private Alternatives business as it was gaining scale, we provided operating capital for county purpose was capitalized in our balance sheet.

During Q4, the management fees from our Private Alternative business was sufficient to eliminate the capitalized expenses on our balance sheet. We expect to begin recording earnings of approximately $3 million per year from our share of management fee income starting in Q1 of 2020.

We're committed to growing in the alternative space. AGF’s Private Alternative business is essential to our mission to bring stability to the world of investing, in an evolving and increasingly complex market environment investors are actively seeking out opportunities to diversify their sources of return.

AGF has a diverse capability that meets those needs and ranging from publicly listed, liquid alternative funds to private investments in infrastructure and credit. Turning a Slide 11, I will discuss the impact of adopting IFRS 16 before I pass it back over to Kevin.

So starting in fiscal 2020 AGF will be adopting IFRS 16 leases. Slide 11 illustrates with our 2019 adjusted income statement, but it looked like with IFRS 16.

IFRS 16 effectively eliminates the concept of an operating lease. As a result, our operating lease payments are replaced by amortization of a right to use assets and interest on lease liabilities.

This results in lower SG&A which is offset by higher amortization and interest. We do not anticipate IFRS 16 to have a material impact on our net income or EPS.

Please note our previous SG&A guidance exclude the impact of adopting IFRS 16, if we take into account IFRS 16, our 2020 SG&A guidance is $180 million, and that's just the $185 million I mentioned less the $5 million effective by IFRS 16. So on Slide 11, we've also adjusted our 2019 results to exclude Smith & Williamson to provide a more accurate comparative for 2020.

In 2019 Smith & Williamson contributed $24.6 million to our net income and $9.7 million to our free cash flow. Adjusting for IFRS 16 and excluding Smith & Williamson our 2019 adjusted net income $32 million and our 2019 free cash flow is $43 million.

Turning to Slide 12, I'll turn it over to Kevin to wrap up today's call.

Before we open the call for questions, I want to take some time to address the leadership changes we announced earlier today. Prioritizing and focusing resources against our stated and strategic imperatives and fostering future talent growth remains at the core of our organizational decisions.

These changes come following my first year in the CEO seat. The changes that I've put in place today are designed to evolve the organization capitalizing on the depth of our talent and elevating the diversity of the team while driving greater accountability for the firm's growth objectives.

In recognition of the importance in driving greater unity, accountability for our distribution teams globally, Judy Goldring has been named President and Head of Global Distribution. Additionally, as outlined in our press release earlier this morning, we announced changes for several senior leaders who have been asked to step into new or expanded mandates with a name to put our people in the places where we need them most including the addition of Damion Hendrickson, who joined the firm March 2 to lead our U.S.

business. Damion joined us most recently from leading HSBC's institutional business for the Americas.

We believe our growth will be led by driving greater accountability for our distribution globally under a single team while continuing to embrace new technologies and digital strategies to drive further efficiencies across our businesses. These leadership moves all link directly to those objectives and demonstrate the conviction we have with our strategy.

With our unique capabilities and fundamental quantitative and alternative investing, coupled with a focus on global and ESG investing, we are well positioned to provide clients the products and solutions that differentiate AGF from its competitors. At the same time, we are cognizant of industry headwinds and the impact of continued market volatility on industry AUM and net flows.

In this context, our primary goals for 2020 are to deliver consistent and repeatable investment performance, drive the organization to sustainable net inflows, position the firm to reach $5 billion in alternatives by the end of 2022 and meet our expense guidance of $180 million, while continuing to invest in our key growth areas. I want to thank everyone on the AGF team for all their hard work, and I'd like to congratulate our leadership team members on their new responsibilities within the organization.

I'm proud of the results we have achieved in the fourth quarter of 2019, and I'm excited about the opportunities ahead of us. We will now take your questions.

Thanks. Good morning.

I know you're probably limited on what you can say on the S&W transaction. But I was just wondering, can you give us some color in terms of perhaps other transactions that the FCA might have blocked in the past and how long it took those companies to resolve the issues?

Any color on that?

Yes. Gary, it's Kevin.

Let me walk you through this. So the applicant to the FCA is Tilney.

Tilney is the acquirer of S&W. As part of that, we're under a nondisclosure agreement with Tilney as part of the transaction that we really actually can't disclose because they are the applicant.

But let's go through a few time lines and some things and maybe help you give you some color in around the process of the FCA. Just to remind everybody, we announced this transaction in September.

On November 13, we received pretty much almost 100% approval of the shareholder vote. On December 3, the transaction was approved by the European Commission around anti-competition.

And on December 12, S&W received regulatory approval to relinquish its banking license. So that puts it in the hands of the FCA.

Your question about other firms and others that have had this issue at the FCA, we don't know a lot. And part of that is many of these firms are private companies and don't have to disclose.

Many companies or some companies, I believe, probably when they're in a negotiation with the FCA and while they have the same scenario that we're playing with, have chosen not to disclose. We've taken a different path.

We've tried to be transparent about what we knew and when. And obviously, I think some of you have asked the question of "If it's just a negotiation, why are you guys out there with this?"

So I think it really has to do with transparency and trying to give you guys as much as we know. Let's go to where we go from here.

Let's take the worst case first. The value that's been placed on this merger, I think, has been if you look at other events post-Brexit in the U.K.

in this space, there's a couple of names yesterday that were rumored to be in talks that would tell you that the business that we have is not only valued at, I think, the right way. It's probably conservative potentially for how the business has developed and continue to grow.

We've done a lot with the business to position it as well. So I would say, in a worst-case scenario, we're still committed that this is a non-core asset that we feel we can transact.

Having said that, let's go to what we think is the most likely case that we believe in. The management of both and the Boards of Tilney and S&W remain fully committed to this transaction, as do we.

We continue to believe in the strategic value that this brings by combining these two players to the market. And we think, ultimately, this is just a scenario not of if, but really when it gets completed.

We're in active dialogue with the FCA on a healthy basis here to get to a resolution. So as I said, there is probably a slight delay in what we said was an early 2020 event.

So I would say, think of that as maybe a quarter or more, but we really can't give any color on that. That's really in the hands of the FCA.

So hopefully, that gave you a lot more than you asked and probably puts some finer points on where we are.

Yes. Thanks, Kevin, that’s really helpful.

And then second question perhaps for Judy. Just on that CSA's recent announcement on the DSC change.

How does that impact you? And have you talked to some of your strategic partners as to how to deal with this change, because I think that's a pretty big cash drag on your business currently?

Thanks, Gary. Well, I mean, as Kevin noted in his script, in his comments that the CSA changes, we will have about a two year window to implement.

And I think the dealers who we are dealing with what it means to have Ontario allowing DSC with the other provinces or not, whether there's operational issues and how they want to transact on their business. And the business model is going to just really be played out over that two year transition period.

So we've been working with our dealer partners. We don't speak about any of our relationships, especially in terms of what we're doing to support their business models.

But we will support their business models in whichever way they want to go. We have been seeing ongoing decline across our total gross sales as a percentage of our business through the DSC fee arrangements.

So it was previously around 21% about four or five years ago, it's now down closer to around 16% of our total gross sales. We're continuing to expect that to decline on a go-forward basis.

And I think what we've done strategically is continue to ensure that our line-up of products can accommodate any fee arrangement that the dealer might want to put in place, whether it be the ETF, whether it be the C series, whether it be Q series with the different beta fees, et cetera. So I think we're well positioned, and we don't view it to be putting us at risk in any way.

Okay. Perfect.

And then just last question, Adrian, just on the old platform, particularly on the LP side. I know that could be lumpy, but is there a certain return that we should model based on your invested capital that we should see come in through revenue over fiscal 2020 and 2021?

Yes. Thanks for the question, Gary.

Yes. On the LP side, it's probably reasonable to assume that most of the funds that we are invested in will have a return target of around 12% and a cash yield in the 3% range, on average.

So when you're doing your modeling, I think calculating the average fee-paying AUM and using those general guidelines is probably a good idea.

Okay. Great.

That’s it for me. Thank you.

Thanks, Gary.

Hi, good morning. I know you mentioned just on the retail side, there was the one redemption, and I think you were describing RSP season is a bit cautious.

Do you have a kind of a crystal ball as to assuming that the improvements in industry flows continue, when you think you could kind of get consistently back into the black on retail flows?

Yes, Geoff, good questions. Let me touch on the redemption first.

As you know, a couple of our large financial players in the bank space have been on the acquisition mode this year. Not sure if this is related to their own changes in their own business models about insourcing or whether this – where the proceeds might – if they went someplace else.

But I can tell you this, it wasn't related to performance, and so I suspect it is probably the former. But not much of that, I think, that we looked through our book and said, is that – is there a lot more of that to come?

On the second piece, I think the fact that the market was strong last year, there is some cautiousness by advisers right now in terms of as we head into RSP season. I would tell you though that I think we've got some really strong relevant products, whether it be on our emerging markets capabilities, global select, our global sustainable product.

So I think there's a lot of things that we are – you can take advantage of if the season turns out to be pretty strong in the RSP season. And on top of that, our liquid alts have really come out fairly strongly as well.

So I don't have a crystal ball on the year. I would tell you there is a slight amount of caution as you get to these record highs where we're seeing some advisers starting to not be as, I'd say, probably more conservative.

So I would not be shocked if the RSP season is a bit muted.

Okay. Thank you for that.

In terms of – yes. Last comment on – we do plan, as I said in my comments, to be in positive flow this year.

So we'll see how that tracks throughout the year, but that is our goal for the year.

And when you say see positive flows for the year, are you talking about for the full year or just more on a monthly basis, the run rate would extrapolate to positive flows?

Yes. We’re looking at the full year.

As you know, month-to-month, it could be a little bit lumpy. There's strong calendar months in here versus others.

So yes, I'd say, look at it for the full year basis.

Okay. And then on Smith & Williamson, I know that you can't talk too much about it.

But the nature of the, I guess, issues the FCA has that whatever you might need to get done to get the deal over the finish line, so to speak. Is it something that could result in the kind of the proceeds, the transaction price that's realized, may need to change like potentially come down?

Or is it other ways that can kind of resolve these issues?

Yes. Let me – a couple of points on this.

The FCA is one of the more stringent regulators, I think, in the developed world, and I have a lot of respect for that. But they are probably one of the toughest regulators in our industry.

And so I think they have had some issues on – with the fund industry in the last couple of years around certain funds having illiquid assets and other things. So I do think that they take a very measured approach on all these transactions now.

So I would read nothing more than the fact that I think they're being just prudent and cautious. I'd say, at this juncture, there's no indication that the transaction can't be solved where the remedy that we would like.

All options are open right now. But we haven't – at this juncture, there's no discussion of term changes, et cetera.

We think the remedies are available that we can use that can get it done.

Okay. And just the last question I had.

I'm just trying to think about it in the context of, for whatever reason, if it doesn't get over the finish line there, I guess, there's been some news in the past couple of weeks around the FCA probing the ACD market and Smith & Williamson is I think one of the players in that. Is that part of the business, kind of how material is it?

And if you have any just comments on the stuff that's been coming out of the news.

Yes. This is related to some of the – what I just mentioned about some of the funds being placed in illiquid assets and other things.

So this is very, very small part of S&W's business, and I think it's not an impact at all in relation to this application for sure.

Like small isn't like less than 10% of earnings or revenue, that sort of thing?

I'll have to get back to you, but when it first surfaced back in December, we looked at it and it was deemed immaterial. So I don't think it has an impact here, but we can get back to you on that.

Okay. Thank you.

Yes, thanks. Good morning.

A question with respect to performance. Your number one in terms of your 2020 focus is to deliver consistent repeatable investment performance.

You used to provide performance metrics, but you stopped providing them saying that they weren't necessarily relevant. Do you have any update as to what your performance metrics are now and how that's been tracking?

Yes. Just to remind everybody, we had found an anomaly probably a couple of quarters ago.

And the fact that the way Morningstar was putting funds in index products and F-Series on one lump, it was sort of distorting the calculation that we were giving you guys. So we have committed to coming back to you guys.

We think we're going to be on track for Q1 reporting to bring back those metrics on a gross basis. Today, we've tried to calculate them manually.

We're trying to run parallel to an automated way to do that. So your next look at that will be in – probably in Q1, we'll bring that reporting back to you all is our current thinking.

And just in terms of generic performance, we've had a little softness because we've been conservative in some of our balanced portfolios. We've sat on more cash this year given the fact where the market had gone and some of the things that we saw out there about – maybe we're getting closer to the end of the cycle, some of the issues around trade that we saw out there and certainly, Brexit.

So our conservatism, which I'm fine with, I'm okay if we lag a little bit going into the end of a market like we've just had. But we haven't calculated year-end numbers yet on that gross basis because, again, it's all manual.

So we will get you something. I think our target is for Q1

Okay, thanks. And just a quick couple numbers follow-up.

So I think when you said that DSC represented somewhere between 21% or 16% of gross sales, is that just retail? Or is – I think you said it was total gross sales.

What is it of retail sales, retail gross sales?

Thanks, Tom. Gross sales, yes, when I was referencing the 16% more recently, it is in respect of all sales across the entire platform for AGF, including alternatives and other vehicles.

In terms of the mutual fund sales, what we're expecting to see on a go-forward basis is roughly about a third.

Okay, thank you. And then, in terms of gross sales in the $479 million in this quarter, I don't believe there is any kind of noise associated with the non-recurring institutional items that I think you're kind of flagging for January.

Was the fourth quarter number at $718 million in terms of gross sales or the fourth quarter last year's number of $718 million, did that have any of these institutional noise in it?

In fourth quarter of 2019, it did not. Fourth quarter 2018 was influenced by a couple of large inflows.

Do you know the dollar amount of those were?

The fourth quarter 2018, I would be pulling out of the back of my memory, I think it's a couple of $100 million. But we will come back to you with a hard number on that, Tom, but that's impacting the Q4 number of 2018.

Okay. Thanks very much.

Hi, good morning. Just on the flows, I'm trying to estimate your institutional business, your private client for the quarter.

Is it – am I right that there was modest outflows on the institutional business and the new private client had about $100 million in inflows?

Institutional business, Graham, and this is Kevin, it was roughly kind of frictional noise in an ounce-type stuff, nothing of a major redemption either way. On the private client side, the $100 million sounds a little bit high.

I think it was some market. Obviously, we have picked up there.

But I'd say nothing material coming in and out on both those channels.

Yes. And sorry, what was the – I missed your color around the retail outflow that you're flagging.

What was the size of that for January?

$200 million, and that's really been transacted out. And that, once again, I would just say, we don't know if it was a partner in-sourcing it or it was going someplace else, but it wasn't performance-related for sure.

Okay. But that is in your mutual fund AUM.

Yes. It will be reported coming up.

Okay. And then your color on the sentiment from advisers, I found interesting.

Am I – just to make sure I'm getting the message right, what – is it fair to say that…

Hey, Graham, you broke off there for a second. We can't hear you.

Can you hear me now?

Yes. Can you maybe start that over again?

Yes. Just the adviser sentiment.

Is your message that advisers are more constructive this year than they were at this time last year, but there's still an element of caution given we've had such strong markets? Am I capturing your message, right?

Yes. Let me – if you go back to the fourth quarter of 2018 right before the beginning of the RSP season, if we had not had that turn on Boxing Day and came out of the gate strong, I would have suspected that we would have had an even worse RRSP season in 2019.

So I think there was a lot of weight on investor sentiment then. I'd say it's less than it was then about the fear of that correction.

I think it's just a cautiousness right now on advisers about where we are in the cycle. So I think you've captured it correctly, which is it's not as bad as it was in 2019 but there's some caution out there.

Okay. That's interesting and helpful.

And the liquid alts, how was the reception been? I think you just started promoting that product in the fall in October.

How's the reception been?

Yes. So the two products that we had that have done really well in the U.S., one we referenced earlier, that's the nominee for ETF of the year in the U.S.

is – had an unbelievable year flows. And so when you add the two shelves together, U.S.

and Canada, from essentially, I'd say, less than $20 million last year, $25-ish million at this time, those two combined shelves are now something that looks like probably close to $350 million, $370-ish million. So I'd say strong start, and we are getting a lot of – probably validating the prior conversation we just had.

There's a lot of advisers. These are hedged vehicles.

We're getting a lot of adviser inquiry about that. So – which leads me to believe that they're getting a little cautious on the market as well.

So yes, they've done pretty well.

Okay. And then just my last question on the private alt side.

You mentioned this $75 million or $70 million commitment, is that for a new fund? Or is that related to the second fund that you already – that you've already been fundraising for?

Hey, Graham, it's Adrian. That relates to the fund that we previously mentioned.

Yes. Okay.

And then lastly, just any plan to move your distribution on the alternatives side towards either your private client business or into the retail channel?

Yes. Graham, it’s Adrian.

Yes, absolutely. I mean part of the strategy that AGF has for alternatives is to try to deliver alternative products in multiple channels.

And I think we – Kevin, just relayed to you the fact that we've been successful in doing that on the liquid alternative side. And I think that applies across the board.

I mean advisers are looking for non-correlated returns. They're looking for differentiated ways to provide returns to their clients and both liquid and private alternatives are a great way for them to do that.

And we'd like to play in that market and deliver the solutions that they desire.

So the infrastructure assets that you've currently got focused on the institutional channel, you do see a fund – potential for that to be in a fund structure that could work for private client and retail?

I would say more broadly, in the alternative space, we're looking to deliver those sorts of solutions, and we're not really prepared to sort of announce any product launches on the call today.

Okay, understood. Okay, that’s it from me.

Thank you.

Thank you very much for joining us today. Our next earnings call will take place on March 25, 2020, when we will review our results for Q1.

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.

Good day, everyone.