AGF Management Limited

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

Today, we will be discussing the financial results for the second quarter of fiscal 2020. Slides supporting today’s call and 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 question-and-answer period with investment analysts following the presentation, Judy Goldring, President and Head of Global Distribution will also be available to address questions.

Turning to Slide 4, I will provide the agenda for today’s call. We will provide an update on the Smith & Williamson transaction, discuss the highlights of Q2 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 prepared remarks, we will be happy to take questions. And with that, I will turn the call over to Kevin.

Thank you, Adrian, and thank you everyone for joining us today. As was announced earlier this month, significant progress was made on the proposed merger between Smith & Williamson and Tilney.

Two firms have agreed to a revised transaction structure that includes a material new equity investment from funds advised by Warburg Pincus LLC and a lower level of leverage for the combined entity. Under the revised terms, AGF expects to receive total cash proceeds of approximately $300 million, including dividends and distributions of $47 million, and this is approximately 2x the current book value.

The return on our investment gives us the flexibility to redeploy capital in a number of ways, including servicing debt repayment, funding future share buybacks, and continuing to invest in new areas of growth. The revised transaction structure will require approval by the relevant regulators, antitrust authorities, and Smith & Williamson shareholders.

Allowing for the process of receiving these approvals in the current environment, the transaction is anticipated to close in the second half of the year. Moving on to Slide 5, we will discuss highlights of Q2 2020.

During the second quarter of 2020, we continued to execute against our strategy and stated goals. I will begin with some highlights.

Given the COVID-19 situation, nearly all of our global staff worked from home this quarter. We experienced no interruptions to our business operations, and in some cases we are performing at a higher efficiency level than pre-COVID.

We have also increased our lines of communications with our strategic partners, clients, and prospects globally delivering timely market updates and information about our products through a variety of digital channels, including agf.com weekly conference calls webcast and direct to client e-mails. Our private alternatives business reached another milestone with the final closing of the InstarAGF Essential Infrastructure Fund II, which raised approximately US$1.2 billion in aggregate equity commitments.

AGF is a finalist at the Wealth Professional Awards in four categories this year, Fund Provider of the Year, Employer of Choice, CEO of the Year, and ETF Champion of the Year. Winners will be announced in September.

We remain on track to meet our SG&A guidance of $180 million with the potential for further savings due to the impact of COVID-19. The Board unanimously 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 in the categories disclosed in our MD&A and show comparisons to the prior year.

AUM ended the quarter at $36.3 billion. Mutual fund AUM decreased by 2%.

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

While COVID-19 has caused a modest slowdown in RFP activity, we continue to see strong interest in our global sustainable growth equity and emerging markets and equity strategies. Performance for our global sustainable growth equity strategy has been stellar seeing the benchmark by well over 200 basis points on a 1-, 3-, and 5-year basis.

Under Regina Chi’s leadership, performance of our emerging market equity strategy has also improved, and we will approach the 3-year mark this fall, which is key for the institutional channel. For our ETF business, our suite of liquid alternatives continues to attract interest.

During the recent market downturn, investors saw firsthand the benefit of diversifying their portfolios with our liquid alternative products. At the peak of the downturn, while the S&P was down roughly 30%, our market-neutral, anti-beta strategy performed as expected and produced positive returns in the mid-teens.

Our global infrastructure ETF, which is available in both Canada and the U.S., has also attracted positive press coverage. We anticipate strong demand for these products over the long run.

We view alternatives as a spectrum ranging from liquid alternatives at one end to private alternatives at the other. Our alternatives business, including liquid solutions, totals over $3.3 billion in AUM to-date.

Our private alternatives AUM reached $2.9 billion this quarter due to our latest fund, which raised considerable capital from institutional investors in Canada, United States, Europe, and the Middle East and Asia. Fund II achieved an 80% participation rate from existing investors reflecting the teams focus on building long-term relationships with its limited partners and has already deployed approximately 35% of its capital to high-quality investments in the United States and Canada.

Turning to Slide 7, I will provide some detail on the mutual fund business. As indicated on our previous earnings call, COVID-19 has introduced unprecedented uncertainty and volatility to global markets.

And surprisingly, the Canadian fund industry reported net redemptions of $15 billion in our latest fiscal quarter compared to net sales of $0.5 billion positive for the same period last year. In this challenging environment, our retail fund business reported net redemptions of $93 million compared to net redemptions of $169 million in Q2 of last year.

As we disclosed on our previous earnings call, we had net redemptions of $65 million up to March 24. For the remainder of the quarter, we had net redemptions of $28 million.

We are also seeing days of positive net sales in June. Despite working from home for most of the quarter, our retail team remained very active conducting over 80 client events and reaching out to thousands of advisors.

In May, we held a virtual event to help advisors navigate the rapidly evolving world of digital client engagement. This event was attended by close to 1,400 advisors.

Overall, our level of client interactions is up 15% versus normal run-rate. Our investment management team has also been heavily involved in supporting our clients by providing expert insights and thought leadership.

Our weekly market update calls, which started the week of March 15 consistently attracted over 750 attendees across retail and institutional channels with participants from Canada, the U.S., Europe, and Australia. Before I turn the call back to Adrian, I want to give a quick update on performance.

AGF measures mutual fund performance by comparing gross returns before fees relative to peers within the same category with the first percentile being the best possible performance. This is a slight modification from last quarter, where a 100 percentile was used for the best possible performance.

We target an average percentile ranking versus peers of 50% over 1 year and 40% over 3 years. As of May 31, 2020, our average percentile ranking over the past 1 year was 49%, and our average percentile ranking over the past 3 years was 56%.

With respect to our ETFs, 80% of our Canadian listed ETFs have outperformed their peers year-to-date and 67% of our U.S. listed ETFs have outperformed their peers year-to-date.

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

Thank you, Kevin. Slide 8 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 restated prior period results for IFRS 16 throughout the remainder of the presentation. We have also included a section on the table showing results, excluding Smith & Williamson.

As Kevin discussed earlier, Smith & Williamson and Tilney have agreed to revise transaction structure. Please recall for accounting purposes, Smith & Williamson is now classified as held-for-sale and equity accounting seized with September last year.

This means only dividends received will be recognized as income. As a result, we recorded no income from Smith & Williamson in the current quarter.

This compares to $6.5 million of equity income in Q2 2019 and $4.5 million of dividend income in Q1 2020. Excluding Smith & Williamson from prior period results, diluted EPS was flat to Q2 2019 and down $0.01 compared to Q1 2020.

Looking ahead, we anticipate receiving a dividend of $9 million in June and a special distribution of $33.7 million immediately before closing. Both items will be recorded in dividend income and the special distribution of $33.7 million will be treated as a one-time item.

Excluding Smith & Williamson from prior period results, EBITDA for the current quarter is $4.5 million lower in Q1 2020 and $2.7 million lower than Q2 2019. If you consider management fees, trailers and SG&A, EBITDA for our wealth management business held up relatively well.

Lower EBITDA in the quarter was partly attributable to income from our investments in private alternative firms, which I will address in a moment. At the beginning of the year, we issued SG&A guidance of $180 million for 2020.

This represents a reduction of approximately $15 million over the last 3 years. Our achievement in efficiency has come at a time we were also investing a significant amount of resources to new and emerging growth areas, including prime alternatives, global and quantitative investing in ETFs.

All of which will be funded from our existing operating capital. With COVID-19 impacting many aspects of our daily routines, we anticipate we will have a further savings of up to $5 million due to the reduction of activities, including travel and meals and entertainment.

Turning to Slide 9, I will 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 average AUM in the current quarter as well as a trailing 12-month view.

Note that, AUM and the related results from Smith & Williamson, the private alternatives business, one-time items and other income are excluded. The Q2 revenue yield is 108 basis points, which is a 1 basis point lower than the trailing 12 months.

The decline is mainly due to a shift to lower fee products. Q2 SG&A, as a percentage of AUM was 49 basis points, which is 2 basis points favorable compared to the trailing 12 months.

This resulted in an EBITDA yield of 25 basis points which is flat to 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 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 $49 million and our dividend payout ratio was 51%. We have committed both operating and balance sheet capital to alternatives.

As Kevin mentioned, we view alternatives as a special. Our liquid alternative AUM is now almost $0.5 billion and our private alternatives AUM is close to $3 billion.

Our total remaining capital commitment to the private alternatives business is $61 million. The original objective of our private alternatives business which started back in 2014 was to generate recurring income, most importantly, management fee profits through a variety of funds and managers.

At the same time, we are positioning the business for future growth. We have succeeded in growing AUM and earning LP income.

We have recorded LP income of $49 million since inception – also since inception and we have earned GP income of $3.3 million and received dividends of $2.6 million. GP earnings have been muted by the fact that potential profit has been reinvested to accommodate future growth.

In addition, accounting has limited our ability to record GP income. IFRS requires the accrued carry expenses in each GP even though they are non-cash and we don’t record the corresponding revenue until carry is actually realized.

If you look at it on a cash basis, total operating cash flow at the GP level is targeted at approximately $3 million per year. And this amount should grow as the various GPs scale.

GP dividend payouts will be in a similar quantum, but maybe more lumpy. Income from our investments in private LP funds was slightly lower this quarter.

The current quarter was impacted by a COVID-19 pandemic in the corresponding market uncertainty and volatility. Since inception, our private alternatives funds have produced gross IRRs above our target of 12%.

We have also had successful monetizations. For example, when Stream Asset Financial LP monetized its seed asset, it resulted in a 65% IRR of this investment.

We are committed to growing within the alternative space. We believe market dynamics will continue to drive assets into differentiated products that provide negative correlation and enhanced returns and increase income levels.

The recent market downturn, if anything, may accelerate this trend. Alternative assets have delivered good relative returns through previous market downturns and we believe it will do so again.

Smith & Williamson transaction will provide resources to help accelerate this growth. We expect to receive net cash proceeds of approximately $275 million.

In the short-term, so when we don’t have any use we intend to repay debt, which currently stands at $201 million leaving the remaining cash on our balance sheet. We would also relever if we uncover compelling opportunities to grow.

We think 1x debt to EBITDA is a good target, while comfortable increasing our net debt to EBITDA up to 2x temporarily. In addition to managing our debt and growth, we would also consider return of capital to shareholders and expect to be active on our share buyback program.

To determine the amount of share buybacks, we will consider a number of items, including timing of cash receipts from Smith & Williamson, our share price and free cash flow levels. Turning to Slide 11, I will turn it to Kevin to wrap up today’s call.

Thanks, Adrian. Q2 was a solid quarter.

Despite the challenges posed by COVID-19, we continue to make progress against our stated objectives. Our retail and institutional distribution teams remain highly engaged and focused on driving the organization to sustainable net inflows despite difficult market conditions.

We expect to receive total cash proceeds of approximately $300 million from the merger of Smith & Williamson and Tilney later this year. Our latest infrastructure fund achieved final close with approximately $1.2 billion in aggregate equity commitments and we remain on track to meet our 2020 SG&A guidance with the potential for further savings due to the impact of COVID-19.

The pandemic has introduced uncertainty and volatility to global markets and economies and has resulted in material disruptions to businesses globally. While many governments have applied monetary and fiscal intervention to stabilize the economy, the impact of these measures as well as the length and severity of the pandemic remains unknown.

In this environment, we would like to reiterate that it’s not if, but when we recover from the economic fallout of COVID-19 pandemic and we believe the best course of action for investors remains a broadly diversified portfolio that includes stocks, bonds and alternative asset classes and strategies. At AGF, we remain focused on our strategic priorities, which are to deliver consistent and repeatable investment performance and drive the organization to sustainable net inflows, position the firm to receive $5 billion in alternative assets by 2020 and meet our expense guidance while continuing to invest in key growth areas.

I want to thank everyone on the AGF team for all of their hard work in these challenging times. We will now take your questions.

Thanks and good morning. Just first question just on the S&W transaction, can you provide any further updates on the approval since your early June announcement, and then how are those progressing and any comments on when the deal could close?

Yes, thanks Gary. It’s Kevin.

Let me take that one. Yes.

So, let’s just remind everybody where we are. So, we announced transaction, revised transaction structure at the end of May which is essentially to give us an all-cash transaction roughly at the time, $300 million, when you consider various cash flows, special dividend, and then what would be the final proceeds.

Our timeline is as follows: As you recall, the first transaction was held back by the FCA with some concern around the capital structure that was going to be used in the merger. That has been alleviated we think given the fact that it is the large equity infusion with a new partner, Warburg Pincus, who will come alongside Permira to help take us out of our stake.

So, the FCA we understand has that new application and will be reviewing it sometime in the coming months. As soon as that is approved, we will take that to shareholders where we expect again a very similar transaction for them so we don't expect any issue there, and then finally it will be -- have to run through the EU and a few other jurisdictions’ antitrust approval.

But given that the combined entity doesn't do any real business outside the EU, we don’t expect there to be a hurdle there as well, which puts the timeline still back into the early fall, early mid fall.

Okay, that’s helpful. Thanks.

And then maybe just further assuming the deal close, and you guys sound pretty confident, you’ve said that for the balanced approach and you guys just outlined that buybacks, debt repayment, and investment for growth; and then just on the buyback piece Kevin, stock had bounced since the news, you know how do you think about the share price today and how aggressive might you be with the buyback.?

Yes, we have been in a black out because of the transaction for quite some time. We had a narrow window that opened in the spring where we were active when we went off our employee benefit trust where we bought a 750,000 shares.

I think the average price was somewhere below 3.5. we still think the stock looks attractive here.

You can also note that while that window opened, a large number of senior management purchased shares in the open market at that time, which should tell you something what we think about evaluation as well. So, as we go forward, obviously we would be looking to add more or take down more purchases of that, but we were also cognizant of the market volatility in cash flows right now until we get through the S&W transaction.

So again, nothing has changed there, but given obviously price sensitivity we would agree it's an attractive level. Obviously, initial proceeds will be used to pay down debt immediately, so think of us being net cash after the transaction, and then some again some balanced approach towards the buyback over the longer term as well as how do we invest for future growth around us -- around some of our initiatives, so that's sort of a balance that we look at and kind of the sequence.

And are you guys in a blackout until the deal closes, is that how we should think about it?

No. We will be out of the blackout, come tomorrow.

Got it. Okay.

And then just last question I think Kevin you provided some color on performance. Wondering if you can give us some details on the net flows outlook kind of for the back half of this year, both on the retail and institutional side?

Yes, maybe I will take the front half of that and maybe give it to Judy on some of the other issues. But yes, market volatility has if you think about it, what we saw on March was unprecedented, and I hate using that word right now, but in terms of the size and speed of that decline, and then what we saw in terms of adviser activity.

We know advisors are still sitting on a fair amount of cash when you look at that sizable redemption we saw in Canada in March which is $15 billion. And we look at what went into money market funds and not just in Canada and around the world, a lot of it is sitting on bank balance sheets, and it is hard to see that a lot of it is coming back, so with advised retail, and I'm going to use that word advised retail has been fairly I think conservative here as market has really screened back to a new high in the midst of probably one of the greatest depression quarters we are about to see from Q2, so the pretty big disconnect between what markets are anticipating for recovery and then vis-a-vis what the economies would do, and so I think that there is a lot of cash still on the side.

You have seen some headlines in press in the U.S. about what I would call do-it-yourself investors in retail, so not with advisors who have been using some of these free trading platforms like Robinhood, Schwab, Ameritrade, etcetera and that activity.

So I would differentiate maybe that investor is frothy, but our advised retail investors seem to be more conservative, and I think we will look to put cash back once you see the economy start to probably get to some firmer footing. But I don’t know, Judy, if you have got any other color or comments on what we saw in the last couple of months.

Just in terms of flows when we had talked about, we first met, I guess last met, it is the bottom of the market and we have reported at the end of – by the end of March, it was about minus 75 out. What we were pleased to see is in April and May it was effectively flat, so ended the quarter at $93 million out, up against a $169 million in the prior year.

So, we are pleased with the performance I think through to the end of Q2. As we look forward into June, we are sort of sitting currently at modest net redemptions better than last year at the same time period.

And as we look forward with continued high volatility, summer months coming and with so much money on the sidelines we are starting to see some cash come back into marketplace and we are very confident about our product line up which have seen some products that have seller performance, we expect again receiving end of – when that money comes back into motion. In terms of institutional, we are seeing again more uptick in terms of our RFI [ph] activity going into the next quarter and again we have products that we believe will be well situated to be on the receiving end of that money motion.

I think you also talked about performance and let me just throw that in where we are at. I mean performance held in really well as you know in that downturn really very, very well and we have been very conservatively positioned going into that and we have also held up pretty well coming out of it.

So, I think we navigated both sides of that – both the slide and the rally pretty well, which I think sets us up okay on the retail side as we move forward.

Okay, great. Thanks for the color.

That’s it for me.

Hi, good morning. Just wanted to go back on to Smith & Williamson to you Kevin is how would you describe your level of confidence that the deal will close in its current form and how would that level of confidence in terms of getting the required approvals differed, if at all versus how you would have felt when the original deal was announced?

Yes, Geoff, good question. I mean, I think in the beginning on the original deal, there was always a concern about the amount of leverage from our part.

That’s why if you look at the structuring originally we had opted to take most of the cash in that transaction. We also know that given that the FCA has been on side, most of the way as we brought along the new equity partner.

That, that hurdle I think that was really the issue there. The central issue has been mitigated.

So, I would say that’s part one of that. Part two of that is that the terms to the employee shareholders, just remember this, we own about a third employees on about third and retirees roughly a third just to make my math easy.

The terms of the transaction and the revised transaction did not change much in terms of overall value to the employees. So, I don’t anticipate an issue with the employee or the shareholder vote as we go forward.

So I think two of the three and as I said we have already had antitrust approval from the EU in the prior transaction that was branched into fall. This doesn’t materially change anything there.

So it doesn’t really I say present any further hurdles there. So I’d say high level of confidence this time around.

I thought it was low that it wasn’t going to pass the last time. So I think it’s – I’d say, you never say never, but it’s pretty high.

Got it. And then just expanding on the question Gary had around redeployment of capital.

So you talked about, okay, pay down the leverage, but I think you’ve also talked about before, it’s just eventually getting back to, let’s call it, a normal or reasonable level of leverage would imply quite a bit of money that you would have to redeploy? And in terms of where you do that, like for example, in your alternative strategy, can you talk about are there provisions where you can increase your cone investment and how much could you add there thinking about acquisition opportunities what might be of interest?

Is it more bolt-ons or something maybe a little bit bigger? And then finally, is it unreasonable to think that there could be some sort of substantial capital return over the near-term say over the next year in the form of a special dividend and/or substantial issuer bid?

Yes. So let’s take them all in a couple of pieces there, Geoff.

On the first one which is the proceeds, so think about this will net out around $275 million of this debt is down to $200 million. So we have some working capital cash on our balance sheet already.

So I think you start out life with $75 million to $100 million we've got commitments already to probably another $60 million or so to our existing alternative funds that we have out there. But think about replacing the S&W earning stream right if you can find assets overtime have a 12% kind of return profile you can re lever up our current EBITDA 1x 1.5x times and replace that earning stream and so then the question second question which you have asked which is where it's not transformational nothing big I think we have done a lot of heavy lifting internally to reposition the firm for growth whether it be build out of our platform our ETF strategies and we start to think about alternatives now as a spectrum right which is private alternative think of infrastructure credit etcetera one end which was longer term funds at the other end our liquid alternatives which have really done pretty well in short period of time.

US liquid and Canadian liquid ETF liquid alternative test we are already approaching half a billion in short period of time so at the other end of the spectrum that's attractive and so we think of the whole spectrum whether its daily liquid where longer term private or some hybrid in the middle as really a place where we can grow and think about feeding other partnerships other joint ventures other things over time to help us get there so don't think of something large and transformational think about something that is really centered around that spectrum of alternatives in different ways to help us with what we think what we see as a pretty good growth part of the investment business and then lastly yes there might be some tucking as we did FFC and get the capabilities that we have stated we would be able to do some of the market neutral strategies within those in those ETFs. So I would say those would be more bolt on things that we would see us do but nothing large scale.

Okay. And then just on some sort of special dividends substantial issuer bid potential?

Yes I might think it’s as I have said it will be a balanced approach I think the board obviously looks at all alternatives to this it's hard to see a special dividend and wouldn't rule anything out but that's not something we're talking about would rather take that money and use it to grow the company organically in the future everything else obviously would be stock price dependent.

Got it. And then just my final question was for Adrian with respect to the $180 million in SP&A and flagging that both in the quarter and maybe perhaps going forward to given COVID-19 some of these expenses can you like do you have a ballpark of what that might look like through the second half of 2020 and then on an annualized basis would any of that be kind of thought as being permanent or is it really more of a temporary reduction of expenses?

Yes thanks for the question Jeff. Yes as I said in my remarks we've worked our expense is down to $180 and that's our guidance for the year that’s a $15 million reduction over the course of the last couple years and if you look at the expenses in the quarter around $40 million that's.

$5 million favorable to the guidance but what I will say about that is some of that is timing some of it is related stock based compensation which will reverse. And so as we always said that SG&A can vary quarter to quarter so we try to point people to the annual numbers and so we reiterating our $180 million expense guidance for 2020 we don’t change it kind of midyear and we tend not to but we think that expenses would likely come in little bit lower we think its trending towards 175 for 2020 so I would look at that 175 for 2020 we can impute with the remaining quarters but again quarter to quarter they don’t always come in perfectly divisible and if you look at the reason for the savings that I just mentioned.

That’s just an actual reduction from COVID-19 things like meals entertainment hiring is a little bit harder to do in this environment and then we are just being very prudent with expenses because we're in uncertain time.

Okay so essentially it sounds like the reduction of expenses in a normal period if that's what 2021 looks like a these reductions are more temporary than anything to be permanent.

Well I would say its 5 million of them are kind of are kind of are a permanent and so far as the $175 million but the timing is more so like Q2 versus Q3 or Q4.

Got it.

And then as far as next year we'll deal with that I came in here we don't we don't start giving guidance for next year and total Q4.

Okay.

Hey Jeff, it’s Kevin. The other thing I would add is even if we found a vaccine tomorrow and everything came back to normal, I still think there is some secular change to every industry, including ours about what we have learned through this that will have a natural reduction to that SG&A limit.

We all don’t have a handle on yet. So, I wouldn’t classify it all as temporary.

Some of it maybe structural in nature if you go forward, but it certainly has helped us take the 15 out the last couple of years when we got into this that we didn’t have to do anything drastic and in fact we can actually start to think about the future in a more destructive positive fashion to our expense base. Got it.

Great, thank you.

Yes, thanks. Good morning, everyone.

Couple of questions. One on flows and one on tax rate, Page 13 in the MD&A mentioned mutual fund net outflows of $498 million, but you mentioned there $93 million if you exclude some non-recurring institutional flows.

The gross sales that’s comparable to the $498 million net outflows is $560 million, how should we adjust the gross sales for mutual funds to reflect the non-recurring institutional flows?

Thanks. Thanks, Tom.

So I think the $498 million you are looking at is last year’s [Technical Difficulty].

Yes. The $93 million was adjusted to something, was adjusted from something wasn’t it?

No, I don’t think so. We do have institutional or sub-advisory retail, yes, $93 has been adjusted, but where we do see…

Pardon me, okay, maybe, yes sorry, I am sorry about that question. So the yes, I was just looking at the wrong one, okay, I am fine with that and the gross sales then, they are all clean then, right, the $509 million then that was all clean, there is no – we don’t – there is no adjustments made to that gross sales.

Maybe – sorry and then the question would be then is there any track where do you see the traction that you are getting on those gross sales in the quarter?

Yes, I mean, really – well, first of all, we have commented about a lot of investors are sitting on the sidelines, but to the extent that we are looking to people coming into it, it’s interesting they have been really focused on global mandates. We have a fun grade award winner, AGF Global Select, which has stellar performance.

It’s been tracking a lot of flows. We are seeing a lot going into our fixed income, again, I think driven a lot by its good performance in the AGF total return bond fund on class.

Liquid alts have been doing very well. We do from a retail perspective look at just – not just mutual fund side, but also the ETF flows and we are seeing positive flows into, particularly the couple of the product centric data strategies that we started last year and we have seen assets fill in there in quite in short order, I mean it’s been quite impressive in our side.

And then finally, the GSG space, we have been really, again, very good numbers on that mandate and it’s an area that’s of great appeal to investors right now. And so we are seeing some flows into that.

Alright. And if we were to adjust the gross sales from last year’s or any of those non-recurring items, how should we look at that?

I might have to get back to you on that off the top. I am not sure….

Yes. We are just looking for the trend in gross sales here, so I think there were some adjustments made to the second quarter of 2019, so yes, just trying to – down 9% year-over-year just as printed in the MD&A, is that – should we be looking at something like that or was the change in the gross sales more?

I am not sure I am understanding the question I mean I don’t think – what I can do is get back to you on the gross sales numbers. As I said, if there were any adjustments I am not aware of it off the top, but if you can just bear with us, we will get back to you on that.

I think yes. Yes, I think what you said in the second quarter of ‘19 the net outflows were $498 million, but excludes some non-recurring items and net outflows were $169 million.

So I am just wondering how should we adjust the second quarter of last year’s gross sales just so we get a handle as to how gross sales are trending?

Yes. So, our gross sales are clean, I mean growth is growth.

We don’t do anything. What we will sometimes on redemptions if we are looking at pure mutual funds, we may take out sort of an institutional large institutional price Series O large redemption and sometimes that occurs on the redemption side, but if you have a particular quarter you want us to compare or if it’s an annualized number, I would have to get back to you on that, but growth is clean.

Okay. Your growth seems to be clean, okay that’s good.

The second is with respect to the tax rate may be Adrian what should we be thinking about in terms of the tax rates I think it was in the area of mid twenties in the quarter but with 19% last year in this quarter how should we be thinking about the tax rate?

Yes I think going forward 22% is a good number to use and then part of the reason that our tax rate is lower than our statutory rate is because the Smith & Williamson earnings which we get on a tax preferential manner of course the 22% is excluding the effect of the special dividend but then after we no longer receive those that income from Smith & Williamson we will see our tax rate in the next year go closer to our statutory rate.

Okay. And then finally is there what's the feedback really just from advisers in this environment are you finding that they are actually more or less productive like may be any sort of commentary with respect to that?

Yes if you don’t mind I can start on that it is been interesting we found an amazing high level of activity retail activity in terms of webinars phone calls interactions has gone up at 15% just in the short time period of the last couple of months in the initial phases I think advisors were looking to have engagement and looking for information we do obviously leave with a lot of thought leadership pieces and that have been really well taken up with weekly calls etcetera and so the interactions were quite high there maybe now if we are getting closer towards summer time a bit more fatigue settling in I think people get a bit of window if you will on these webexs etcetera but at the same time the opportunity that really is providing solutions to advisors giving them thought leaderships and giving them indications of where the market is going and then continued interactions and so we are still seeing a high level of activity and engagement and much shorter but potential kind of interactions which are really effective I think so I Kevin do you have any comment.

Yes I think listen we are all adapting right we are sitting here almost guess we're heading to work from home almost 4 months in, right its been work from home so we are all making tweaks and adjustments to it the retail world wouldn’t be any different term right there are going to be some advisers who will obviously pursue a flex world on the way back in, right? Again, unless we actually get to a true therapy and a vaccine it's hard to see anything more than 20% the downtown core of any major city coming back and we are building and so I think a lot of behavioral change we are going to see is going to be it's going to be here for a bit I think the ability to have the use of digital tools and digital marketing which a lot of spend that we did the last couple years has been a big advantage in this.

And so I think to Judy's point, I think everyone's behavior has changed a bit, but our actively level state now I would say the same has picked up and I think advisors are going to want to engage they may be exhausted from zoom but they are going to resume a normalized level of activity just may be different.

Okay thanks for your time.

Hi good morning.

Good morning Graham.

My first question is just on the private outside I think you said 35% of the EIF2 fund has been deployed so how should we just think about what's coming next for that platform is a reputed time here where you deploy the rest of those funds before you start launching the third fund or are you already looking at launching a third fund?

Yes obviously we have to get that deployed this is actually good opportunity get that deployed but we would think about assets being where they are on the world today. Infrastructure assets are especially the ones that we tend to invest in tend to have differentiating capabilities differentiated business model and they tend to withstand these type of events better than certain other asset classes so the opportunity says probably build or invest in environment pretty good But obviously, that's going to take a period of time.

Okay understood. And the capital that you committed to invest I think is $207 billion behind that thought so how should we think about as you move towards that $5 billion target.

What’s the total amount of capital that you would be you essentially would need to circle investor commit behind that?

Yes. Maybe I will take a quick shot at that.

And so the way I think about that is if you are always getting some assets recycled back as funds mature. And so like look at today, we have probably $60 million of that, I think that’s probably right about what we have left on the current funds that we are in committed.

And so as you commit to a new fund, other funds are starting to mature. My guess is Adrian and I have done some modeling on this at given time that number could be upwards of kind of north of 200, but it’s not significantly north of that, because again you are always getting some flow of funds back through it.

Maybe Adrian do you have a different view on that?

No, not at all. I mean, precisely to your point, Kevin we get, we have already had couple of significant monetizations plus you have to also count on the fact that when you make the investments in these private LPs, there is a lot of cash flow coming back to you just in the form of recurring distributions from the LPs.

So if you look at the total amount that we commit we will never get to the right number invested. And maybe just add the point that the earnings from the LP investments are great and we also enjoy the cash flow from them, but the primary purpose of the platform is to earn recurring management fees, so the reason that we make these seed investments or support the launch of these things as to mature our recurring management fees, that’s where we are really focused on.

Okay. Yes I was just trying to connect it back to the proceeds that you have for Smith & Williamson, how much it’s going to be essentially access versus what you may need to further deploy behind that?

Yes. I think maybe the point you can take from that is that we can grow across the spectrum of alternatives despite kind of continually redeploying stuff as it matures or monetizes without significantly increasing that the total amount that we got invested in seed at any given time.

And I think Kevin gave you some good guardrails as far as what we see over the coming years.

Okay. I think I understand that.

And then there was some commentary around just your revised performance targets, did you lower your 3-year mutual fund performance target from 60% to above medium to 40%?

No, what happened there, Graham is that we have got some feedback from everybody, because remember we were struggling last year and we suspended it for a while to figure out a better methodology. And so I think if you think of what you just left, right, so what we are saying is we want to have our complex to be 40% in the top 40% of assets.

But in other words think of it as if median is middle, 60% is a third quartile, 40% is a second quartile, we are saying that over 3 years we would like to have bulk of our assets in the second quartile or better.

Okay.

Literally just a flip and that was based on some feedback we got from folks.

Okay, that’s it for me. Thank you very much.

Thanks. Just a quick one, just a fair value adjustment in other income line, I was little bit lower this quarter, Adrian, can you kind of give us some color like looking how should we were back to kind of the normal level and how long would that take?

Yes, thanks Gary. Yes, when you look at the private alternatives business fee income hat comes off a bit when you think about it from a longer period of time, it’s pretty stable.

The income that we earned from those LPs in the quarter was affected just by COVID-19 and some of the market disruption. But we feel pretty good about the value on our balance sheet as it sits today, especially because of the recovery of commodity prices in the increased economic activity.

And so the pieces for alternatives, is intact and we expect that over the coming quarters. We would revert back to the normal expected earnings.

If you look at it over a longer period of time at the AGF Management level, in terms of alternatives when we have stuff in the target 12% and all of the investments we have made have met that targets our replace with that.

Okay, great. Thanks.

Alright. Thank you very much for joining us today.

Our next earnings call will take place on September 23 when we review our results for Q3 2020. Details of the call will be posted on our website.

Finally, an archive of the audio webcast of today’s Q&A and supporting materials will be available on the Investor Relations section of our website. Good day, everyone.