AGF Management Limited

Thank you for joining 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 first quarter of fiscal 2020. Slide supporting today's webcast can be found in the Investor Relations section of agf.com.

Also speaking today will be Kevin McCreadie, Chief Executive Officer and Chief Investment Officer. For the live Q&A session and the answer period with investment analysts, 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 address the impact of COVID-19.

Discuss highlights of Q1 2020 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 2020. After the reported remarks, we will take questions.

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

Thank you, Adrian, and thank you everyone for joining us. Before I discuss the highlights of Q1 2020, I wanted to address the impact of COVID-19, which has introduced unprecedented uncertainty and volatility in global markets and economies.

AGF has a comprehensive pandemic and business continuity plan that ensures its readiness to appropriately address and mitigate any business risks and impacts to clients and employees. We've made a concerted effort over the past two years to move our office environment to the cloud to prepare us for times like these.

Over this past week, more than two-thirds of our employees are working and signing on remotely and with minimal issues. As of Monday evening, we have implemented a full work home program except for certain employees working at our BCP site, Business Continuity Planning site that is.

In these volatile markets, we are focused on delivering the best possible stewardship of the investments that clients have entrusted to our care. We actively manage for and stress tests all of our investment portfolio on a regular basis under various market conditions to effectively control for our liquidity management needs across our suite of investment solutions.

We will continue to monitor the situation closely and follow the latest guidance from local, provincial and federal health authorities to ensure our practices are aligned with the latest recommendations. Starting on Slide 5, we'll discuss highlights of the first quarter of 2020.

During the first quarter, we continually executed against our strategy and stated goals. I'll be giving some highlights.

Despite the recent market volatility, our mutual fund business reported gross sales of $562 million in the quarter 9% higher than the first quarter of last year. Our private alternatives AUM reached 2.7 billion, up 27% from a year ago.

And as of February 29, our key strategies including fixed income, global select, global sustainable growth equity and emerging markets equity strategies are all performing above benchmark on a one, two and three year basis. In January, the AGF Global Convertible Bond Fund, AGF Global Select Fund and AGF IQ Global Income ETF Portfolio Earn Fund Grade A plus Awards, which are given annually to investment funds and their managers who have shown consistent outstanding risk adjusted performance throughout the year.

On the U.S. side, one of our funds is a finalist for the 2019 ETF of the Year Award by etf.com.

Fund uses a long and short strategy to create a market neutral stance that has provided a positive return for investors in the current negative market environment. On March 2, Damion Hendrickson joined AGF to lead our U.S.

business and drive growth in key institutional segments. Damion was most recently head of Americas for HSBC.

We remain on track to meet our SG&A guidance of 180 million. And the Board unanimously confirmed a quarterly dividend of $0.08 per share for the first quarter.

Starting on Slide 6, we will provide updates on our business performance. On 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 37.4 billion. Mutual fund AUM decreased by 3%.

I will provide more color on our mutual fund business in a moment. Institutional and sub-advisory and ETF AUM decreased compared to prior year mainly due to the redemptions that we addressed in previous quarters.

In the past several weeks, we received redemption notices from two clients with $760 million expected to transact in Q2, and $560 million expected to transact in Q3. The annualized revenue impact is approximately 2.3 million.

The Q2 redemption is a sub-advisory relationship with an ETF provider that will have minimal financial impact. The Q3 redemption is due to a client internalizing their investment management capability.

For our ETF business, our suite of Canadian and U.S. exchange listed funds continues to experience growth.

In the current volatile market environment, our liquid alternative products are uniquely positioned to meet investor demand for income and for risk management. Our market neutral anti-beta strategy, which trades under the ticker 2VTL in Canada, is designed to provide hedge the equity markets providing protection during draw downs, while maintaining outside participation.

During the recent market downturn, the strategy performed as intended, while the S&P 500 was down over 20%, our market neutral anti-beta strategy produced positive returns. Our U.S.

long and short dividend strategy which trades under the ticker symbol QUDV in Canada, which is also offered as a mutual fund is designed to provide income through equity dividends with [indiscernible] profile. Both strategies are available as U.S.

listed ETFs and obtained record flows in recent months. Our private client business continues to demonstrate consistent and steady growth with AUM increasing 5% year-over-year.

Our private alternatives AUM reached 2.7 billion this quarter, due to our latest fund, which raised considerable capital from institutional investors in Canada, United States, Europe, the Middle East and Asia. The fund has exceeded its $1 billion target size and is expected to achieve final close later this year.

Turning to Slide 7, I'll provide some detail on mutual fund business. For the past 12 months ending February, the Canadian mutual fund industry reported net sales of 23.9 billion compared to net redemptions of 9.7 billion for the prior 12 months.

Despite the improvement -- sorry, in the second half of February, North American markets were significantly impacted by the COVID-19 outbreak. In this challenging environment, our mutual fund business reported net redemptions of 344 million.

This includes a redemption of approximately 200 million from a client invested in the institutional series, which we disclosed on the previous call. Excluding net flows from institutional clients invested in mutual funds, net redemptions were 141 million for the quarter, compared to 104 million in Q1 of last year.

I know we usually provide guidance on when we expect AGF to return to positive net flows. It is difficult to offer a meaningful outlook when the precise impact and length of COVID-19 pandemic remains unknown.

I can tell you that in speaking with our retail and institutional distribution teams, that business is still being done but done differently. With COVID-19 impacting all of our daily routines meeting with clients and prospects have become a far more virtual transaction.

Our call centre has seen no material change in volume or types of calls and transactions. March 2020 numbers remain similar to March 2019 activity.

On the retail side, our wholesalers are in constant contact with advisors leveraging digital, outreach tools and sharing portfolio stress testing with a capability we launched last year. Same time, we are providing expert insights and thought leadership to support clients in navigating this rapidly changing and uncertain environment.

We are also actively using a behavioral profiling model that incorporates all our touch points with users across our global client channels. We have an agile approach which allows us to adapt as we test and learn.

This allows us to arm our sales team with new insights as the model wants. Before I turn the call back to Adrian, I want to give a quick update on performance.

AGF has historically reported percentage of AUM above median, which involved [indiscernible] trailer mutual funds to the population of competing funds. With the proliferation of non-trailed versions of mutual funds and ETFs and their inclusion in the above median data set, the metric was no longer relevant, as we have previously discussed.

Starting this quarter, we will be again reporting performance of our mutual fund strategies using gross returns removing the impact of significant fee structure differences within the data set. As of February 29 2020, our average mutual fund percentile ranking over the past one year was 40%.

Our average mutual fund percentile ranking over the past three years is 46%. Since February 29, our performance has held up well to put it into context as of last Thursday, the MSCI all countries world index is down 21% since the end of our fiscal Q1.

In comparison, our AUM excluding private alternatives is down 14% over the same time period. Keep in mind, roughly a quarter of our AUM is in fixed income.

Year-to-date through Friday 56% of our mutual funds perform better than the median. With that, I'll turn the call back over to Adrian.

Thank you, Kevin. Slide 8 reflects a summary of our financial results from the first quarter with sequential quarter and year-over-year comparisons.

For ease of comparison, we've included adjusted numbers and restated prior period results IFRS 16 throughout the remainder of this presentation. EBITDA from the current quarter is 30.2 million, which is $5.6 million lower than Q4 2019.

It is mainly due to lower Smith & Williamson income and timing of SG&A. Due to the classification and held for sale for Smith & Williamson, in q4 we recorded 7.8 million of equity and dividend income.

In Q1 2020, we recorded only 4.5 million of dividend income. 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 EBITDA before commissions as a percentage of AUM, the current quarter as well as the trailing 12 months view. Note that AUM and the related results from Smith & Williamson, the private alternatives business one-time items and other income are excluded.

The Q1 revenue yield is 110 basis points, which is consistent with the trailing 12 months. Looking forward, all else being equal, anticipated revenue rate may increase slightly due to the committed redemptions that Kevin indicated earlier, which were of our revenue rate.

Q1 SG&A and as a percentage of AUM was 51 bps flat to the trailing 12 months. This resulted in an EBITDA yield of 25 basis points which is 1 basis point higher than the trailing 12 months.

Turning to Slide 10, address free cash flow, capital uses. This slide represents the last five quarters of consolidated free cash flow or trailing 12-month basis adjusted for one-time items as shown by the orange bars on the chart.

Black line represents the percentage of free cash flow that was paid out with the dividend. Our trailing 12 month free cash flow was 51 million and our dividend payout ratio was 49%.

Our total remaining capital commitment to the private alternative business is 61 million. Given the recent market volatility, I'll address what this means for AGF's capital position and profitability.

Like other asset managers, a persistent market downturn negatively impacts our profitability and cash flow as a significant portion of our revenue is driven by market sensitive AUM. In general, for every $1 million production in average AUM not including private alternatives, net revenue would decline by approximately 7.4 million.

Keep in mind, the sensitivity of our AUM to equity markets is buffered by fixed income, and can also be bolstered by weak Canadian dollar since much of our AUM is quote. Depending on the length and severity of any downturn, we can adapt by adjusting our SG&A to reflect market conditions.

Our priority is to preserve financial flexibility and positively influence the sustainability of the dividend. Please keep in mind with COVID-19 and its impact to our daily routines we will have savings due to reduced or revised projects and activities including travel and meals and entertainment.

For now, we're reiterating $180 million expense guidance for 2020. At $180 million, we will have removed close to $15 million of expenses, part of an expense management program that began three years ago.

This program positions us better to deal with the current market disruption. In a worst case scenario, there may be some concern about our leverage ratio or staying within financial covenants.

Although we don't disclose our covenants, nor do we provide for guidance on this. Keep in mind, we do have options to manage this.

For example, working with our credit providers, but they've always been very supportive; SG&A could be further reduced. Previous work here has improved our position, as I mentioned, if necessary, would consider monetizing items on our balance sheet that are not strategic.

We have investments in alternatives LPs and seed capital, with total 166 million and that compares to our long term debt of 218 million. And all of this is before considering monetization of Smith & Williamson, which we have disclosed could provide additional cash of approximately $280 million.

During the Slide 11, I will turn it to Kevin to wrap up today's call.

Thanks Adrian. Q1 was solid quarter.

We continued to make progress against our stated objectives. Mutual fund gross sales were 9% higher than Q1 of last year.

Our mutual funds and ETFs continued to receive industry recognition. Our private alternatives AUM reached 2.7 billion furthering our goal of reaching scale on this platform.

Our balance sheet remains strong, with 166 million of marketable securities. Our transaction to monetize S&W, while delayed pending the approval of the FCA remains active and is expected to close later in the year.

We anticipate receiving total cash of 280 million upon closing. We believe the pullback in economic activity will result in a recession with central banks and governments around the world are now flooding the markets with liquidity that is crucial to minimizing the current crisis.

And once the pandemic is under control, we should experience a swift recovery led by a rebound in global stock prices. In this challenging environment, caution, not panic should be everyone's mindset.

It's not if but when we recover from the economic fall out of the COVID-19 pandemic. And we believe the best course of action for investors' remains a broadly diversified portfolio may include stocks, bonds, and alternative asset classes and strategies.

I want to thank everyone on the AGF team for all of their hard work in these challenging times. This concludes the event and we look forward to your live questions.

Thanks. Good morning.

We just start off sure it's been topical. Yes.

Are you able to provide some color on where your AUM stands currently, and how has net flows been in March, so far? Any commentary on outlook flows will be helpful.

Thank you.

Sure, Gary. This is Judy Goldring.

Thanks for the question. Our AUM as of end of day yesterday set at $33 billion, including private alternatives.

That was down about 12% off of the Fed 29 state. If you exclude the private alternatives, then we're at 30.3 billion, and that's down about 13%.

And as we know, the market is being off closer to 17% to 25%. In that range, I think we're holding up very well on that.

When we're looking at net outflows as well, I think it's helpful to be fairly transparent at this time. So we have seen of course, a flight to safety for investors, obviously, they're very nervous.

Gross sales are down about 5% for us with both redemptions up about 17%. And we're seeing net outflows for the month of March from -- sorry from March 1 to yesterday of 65 million.

And that's versus the $22 million number last year. So we are seeing some movement for sure.

Kevin, you can speak to the outlook on where we see this market going.

Yes. I think you have to put in perspective, there's been a pretty good run from equities for the retail investor around the world right now.

And if you think about that, they redeem at of an equity fund, they sit in cash on a typically a sweep fund for whatever broker dealer et cetera. So you're going to see a gap between gross in the redeemed side right now.

In terms of outlook, your second part of the question, Gary, I mean, if this thing and we anticipate this is not months and years, this is, I should say, not quarters or years, it's probably a month, month, maybe that we're in this and to the extent you get economic activity started, and you get these markets to stabilize, we think you probably bring back some of those flows back into equities. But clearly, there's some volatility ahead in the markets, but I think the longer it goes, I'd said the more psychological damage you may do, if it's a shorter event as I suspect then I think you do get some type of recovery in markets later in the year and therefore flows.

Great. And yes, those numbers are very, very helpful.

Maybe second one, just on the S&W. We've gotten the update last quarter but it doesn't sound like the language has changed much in your MD&A.

Are you able to provide any color on where the deal stands today, any repricing risk from your end?

Yes. Really is no update.

I mean, as you know that the discussion with the FCA are actually ongoing. Management, both Tilney and Smith & Williamson remain committed to the transaction.

So, it's really in the hands of the FCA, which as you can imagine, right now, it's got a few of the things they're dealing with. But there's no -- nothing either positive or negative to update on vis-à-vis where we were last quarter on this.

We still anticipate as we said in our comments that this transaction closes sometime this year.

And remind me have they refiled I don't know with the first one you said there were some struggles with it, but had the Tilney and S&W refile to the FCA already?

Yes. So the application is Tilney because they're the acquirer.

So we're not privy to the exact application process. But I understand that there have been, we know that there have been obviously dialogue with the FCA about what is needed to remedy whatever their concerns were.

Okay. Got it.

And then just lastly, maybe a numbers question for Adrian, the GP income this quarter 0.1 million was quite a bit lower than what can I have my model and I think you've guided too in the past 2 million to 4 million annualized. Can you help us think through this and what should we model on a run rate basis?

Yes. Thanks for that, Gary.

I think that estimate is probably a decent one for the underlying earnings. But you probably noticed, as disclosed in our financial statements, we began to accrue carry.

And carry is an expense that basically increases the accumulated losses. So, that's going to defer the recognition of income on our income statement.

But again, keep in mind that the accrual is a non-cash, we don't recognize the other side of that, which is the fact that when we actually earn carry, it will be a benefit to us, obviously. So, the other thing to keep in mind Gary is again, in note five we disclosed that we received the dividend from our alternatives platform during the quarter that might be a better way to sort of assess the profitability of the platform going forward.

Okay, got it. Those are my questions.

Thank you very much.

Thank you. Good morning.

So just want a point of clarification on the last answer, Adrian, if you don't mind. So I think the explanation I hear is on let's call it base fees and base operating costs.

The GP is running roughly breakeven, but the profitability is assumed to come from carried interest. Is that correct?

I know. So here, let me clarify.

The underlying earnings that we have guided on our -- I'm saying there's no updates there. But the recognition of those underlying earnings are going to be deferred because just for accounting purposes, we have to start to effectively accrue carrier account for carry, even though it's a non-cash expense and you don't recognize the other side of that entry, which is that eventually if carry is paid, we will be the recipient of it.

So it's really a difference between the underlying earnings which you can't see, that gets basically buffered by or we're limited in terms of recognizing it, because we have to accrue expenses such as carry, and it's just an accounting phenomenon. Does that clarify?

I understand. Yes.

So question related to Smith & Williamson, do you have an estimate or do you know if there's break fees associated with that deal if it doesn't happen to go through?

Yes. Paul, this is Kevin.

We haven't disclosed those terms. But just for the call, there are no break fees in this transaction.

Sorry, there are break fees in the transaction?

There are no there are no break fees in this transaction.

No break fees. Okay.

Got it. Okay, maybe an update on the private alternatives or thoughts really around implications from COVID and maybe even more importantly, what's happening in the energy space given where oil prices are.

Yes. Sure.

So, as far as the our investments and the alternative LPs in the business in general, you got to keep in mind that a lot of the stuff is not correlated. And a good reason for that is that the investments that are made are longer dated, they tend to have contracted cash flows.

And including any of the investments that are exposed to what's happening in the oil sector, we're pretty comfortable with how the portfolio is positioned.

Okay. And then, last question, you talked about balance sheet flexibility, do you have appetite and capacity to buy back stock opportunistically here?

Hey, Paul. It's Adrian again.

So we're in blackout because of the Smith & Williamson sales so we would be restricted from doing that. But absolutely, it's something that we would consider in the context of our capital plan.

Paul. This is Kevin.

As we've said in the past too, when Smith & Williamson does transact, we will take a balanced approach to this, which is paying down debt, obviously, but also some amount of a buyback but also reinvesting in the future. So that has not changed.

Okay, Got it. Those are the questions I had.

Thank you.

Hi, good morning. My first question was for Judy, I appreciate the transparency on the AUM and the net sales performance.

Just wondering if you can comment in terms of how that either, is it daily or weekly, like how that trend has been -- is it been, as the markets have sold off that's actually been picking up or is it been, relatively steady?

Well, I can talk about sort of certainly our process inflows have been consistent from a back office perspective. We've obviously seen some spike of movement into money market.

But there's sort of consistent trend of behavior that we're going to see with these investors as they respond to the market. There definitely is nervousness for sure.

And we're seeing that.

Yes, Geoff, it's Kevin. I would say that in the beginning, when this thing started, obviously, you saw a large gapping.

And the redemptions they've seemed to in the last couple of days now in a more stable pace, so I'm not -- it doesn't feel like -- it feels like the panic selling is somewhat behind us. I still think there's a lot of nervousness out there.

Okay, so it might be more of the gross sales issue than necessarily redemption. Is that a fair characterization?

Yes. At this point, I think people are sitting on the sidelines for sure until they see it with the [indiscernible].

Okay. And then Adrian, you were talking about with the -- some of the investments like in the energy space, and it sounds like with what you've got invest sort of the nature of the types of investments you've got, that there isn't as much of a kind of a potential hit on the mark-to-market for those investments.

But I also wanted to ask about, you talked about it's possible looking to monetize certain investments if you want to increase your liquidity position, just wondering how you balance that in the context of you asset values, broadly speaking up, come off, and then also having other investors in those assets that may also have different considerations as to whether or not to monetize certain investments.

Yes. Thanks, Geoff.

So I'm just really talking about that in the context of a worst case scenario, we don't have any intention to already need to monetize or liquidate anything. It was really just more so to help you feel comfortable around the strength of our balance sheet.

Okay, but you would have to kind of figure out the balancing of there because it's not just assets you own entirely yourself, you have other investors that you'd also need to take into consideration. Is that the right way to be thinking of that?

No, not necessarily Geoff, so if you if you think about the private alternatives market, generally there is a secondary market for LP units. So I don't think that there's any sort of coordination that would be needed, but again, I want to stress that really, what I'm talking about is the strength of a balance sheet and we're not having any tension or any need to liquidate anything at this point in time.

Okay. And just the last question I had for Kevin, can you describe I guess if it's -- there's some sort of general way you can describe how the funds were positioned before the market started to sell off.

How's that positioning changed even a little bit, given where we are today?

Yes, Geoff. Thanks.

So I think many of you guys know, we've spent time talking over the last year, we've been somewhere in the camp that things were, we were moving to new highs on things. We had played a little more defense last year, which hurt relatively as the markets had 30 plus years -- 30 plus percent years, in that manner our balance accounts had more cash.

We used in our balance accounts to hedge one of our liquid all ETFs which is an anti-beta ETF. So in fact, in the quarter at its best here, with the market down near 30, it was up plus 18%.

So that's a pretty dramatic spread. So having a couple of percent in all of our balance products, a big chunk of it, and our sector class has really bumps up in pretty good shape with that thinking.

We have started to leg some of those tools out and like back in the markets, but I think we're going to be in for chop from here, but performance relatively, and I don't have through last night, I think probably 60% of our assets right now or more are in those top two quartiles and most funds I think almost all funds or it says the majority are well ahead of their benchmarks right now. So that defensive posture is clearly helped.

And I think as we go back to advisors, after this settles down, I think that's going to be a pretty good story to tell.

Okay, great. Thank you.

Hi, Good morning. Kevin if I just follow up on that the anti-beta performance, is at the market neutral ETF that you were referencing, or is it different product?

Yes. No, that is, we launched that in the U.S.

We've had it there for since 2011. So we've had a pretty good track record there know how it asked me these kinds of times.

It was kind of built after the thinking of '08. What it does is short, the highest bidder names in the market and goes long and equal basket of low beta names.

So if you think about beta, in an up market, high beta names, if the markets up 10, maybe they were up 12. The same thing doesn't happen.

There's an asymmetry to beta. So when the markets down 10, those names tend to be down 17.

So the ability to short that bucket of things gives you a negative or down market, your shorts work a lot harder for you and since you're long, the low vol piece of it, those hold up better. So you put them together in while it's market neutral, you actually have a negatively correlated asset.

So what you're hoping for is in a really down tape that you're actually generating a positive return, all the rules based so you're not worrying about the skill of the manager.

Okay. So bottom line the products performing as expected through this volatile hit?

Exactly as it should have.

Great. And the performance that you talked about 50% of your assets in top two quartiles, is that through March or core data or what's the time period for that?

Yes. That's year-to-date.

Year-to-date. Okay.

Thanks.

And March has been similarly strong. And I should have found that, the U.S.

version we launched back in -- as I said, in '11, we launched the Canadian version of that anti-beta market neutral ETF here in the fall, so it was timely to be able to use that within our Canadian products and with advisors joining us.

Got it. Can you talk about the flows on the liquid alt and ETF side?

Like, I'm not sure we can actually break it out of your institutional AUM line item?

Again, people are using these tactically. So it's a spot in time at its peak.

In other words, think about it this way. Some advisors as market risk was picking up or adding to it, as markets are bottomed they have taken some off so they use it more as a lever back and forth.

But at its peak between the two shelves U.S. and Canada, we were probably north of a half billion from virtually not a lot last year at all, if you think about the Canadian shelf just launched in the fall.

Okay. Adrian, I will jump to the SG&A guidance, 180 million.

Is that including the IFRS 16 impact?

Yes. It does include that Graham.

Okay. Can you help us quantify was it roughly 1.2 million in the quarter?

Yes. It's about a million dollar [indiscernible] interest in depreciation and there was an offset as far as the savings on [indiscernible].

Okay. That's fine.

That helps. And then just lastly, I think you said you don't disclose the covenant on debt to EBITDA.

Is that correct?

That's right.

Okay. How about just your comfort level on leverage that -- for some reason Smith & Williamson is delayed, or market stayed volatile here for a while, like what is your comfort level before you have to start with your SG&A or potentially, worst case monetizing.

Maybe I'll take this from first and maybe you can add in. Yes, I think Graham, we have been very -- I'd say cautious about our thinking about this.

As you saw we took $15 million out of expenses last couple years not because we've been thinking about where markets are. So, in the worst case scenario, then we let's assume we have to be here another year down this level and take it even further down.

There's a lot of things we can do. And so I'd say that I'm not concerned about it.

But the things we listed out in the call commentary earlier, really to show you that there are things we can do in those worst case scenarios, but I don't think we're there. But we obviously will have planning around that.

So I have a fair amount of comfort in our balance sheet right now. Maybe Adrian you want to add there?

No. I think for the coming weeks and months, we're going to continue to monitor AUM revenue expense levels and adjustment is needed.

Okay. That's it for me.

Thank you.

Thanks. Good morning.

A question about the fee rate, 108 bps in the first quarter of this year versus like 102 in the first quarter of last year? What's driving that?

Is there any kind of shift in the mix here? Or is there anything else happening?

And is it sustainable?

Hey, Thomas, Adrian. Thanks for the question.

Yes, that's a good one. It really is mix.

And it's effectively a larger proportion of our AUM is retail. And so when we give our guidance that a couple of basis points a year decline, that's sort of what I would have fixed asset mix.

But obviously quarter-to-quarter, year-to-year, the mix can change. So the direction of fees by line of business is probably flat to down.

But when you look at it overall, I think he pointed out correctly that mix could have a very large effect on.

Okay. And with some of those institutional redemptions coming out.

Is that well, the denominator shrinks is the impact on the numerator is a little bit less just because there's more retail?

Yes. That's correct, Tom.

Okay. And then I just want to go back into these kind of worst case scenario talks you've talked about here in terms of monetizing.

I mean -- we've heard you say that would be a worst case scenario, and this would be a worst case scenario. What is this worst case scenario?

Is it -- how much more of a decline in markets or is it we don't get Smith & Williamson and what -- I was wondering if you can share any color in terms of what you mentioned, you did do some stress testing, but if you could share with us what your worst case scenario here is, start monetizing things.

Yes. So Tom, it's Kevin.

So, let's assume we probably expected S&W is going to monetize. If it weren't to monetize, that's not going to be any kind of a trigger for us.

S&W is a well performing asset has provided a good dividend, and the business continues to do well. So what we think about is a market that goes from here, another 20 to 25 down, and we're there for a couple of years, right?

That would be in my mind, where we'd have to start thinking about how do we just optimize our business for the future as all firms in our industry will -- on all sides of it, right? I don't think that scenario is likely.

But that's why we're saying it's probably the worst case, but it doesn't really centre around S&W. Obviously, if S&W transacts, it'll be think about having cash in this environment would be actually a pretty -- there will a lot of optionality for us to do things.

But worst case does not rally around S&W at all, because we'd like that business at the end of the day. If it doesn't transact, it's performing well.

It's really around a market that stays here and that this duration that is just way out into the future.

All right. Okay.

Thanks for that.

Thank you very much for joining us on today's call. Our next earnings call will take place on June 24, 2020.

We will review results for Q2. And details will be posted on our website.

An archive of today's call will also be available. And the AGF team wishes all of you good health and Good day everyone.