AGF Management Limited

Thank you, operator and good morning everyone. I am Adrian Basaraba, the 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 2020. Slides supporting today's call and webcast can be found in the Investor Relations section of agf.com.

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

Turning to slide four, I will provide an agenda for today's call. We will discuss the highlights of the fourth quarter and fiscal 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 2021.

After the prepared remarks, we will be happy to take questions. And with that, I will now turn the call over to Kevin.

Thank you, Adrian. And thank you everyone for joining us today.

Over the last year, despite of volatility and uncertainty caused by COVID-19, we made significant progress against our strategy and stated goals. I'll begin with some of the highlights.

We successfully monetize our interest in Smith & Williamson, a notable achievement given the market environment in the first half of 2020. The transaction generating gross cash proceeds of almost $300 million, which allowed us to fully repair long-term debt and return $40 million to shareholders through a substantial issuer bid.

With the strong balance sheet and liquidity, we are well-positioned to reinvest in the business and pursue growth initiatives that will generate stable sources of earnings and cash flow. In line with that goal, we continue to develop our private alternatives business with several milestones achieved during the year.

We established the AGF Alternatives Advisory Committee with industry veterans, Ron Mock and Michael Latimer. In June, we announced final closing of the InstarAGF Potential Infrastructure Fund II to the approximate US$1.2 billion in aggregate equity commitments.

And in September, we expanded our partnership with SAF Group to enhance our private credit capabilities. We will be launching several innovative private credit products in the coming months, which Adrian will discuss in a moment.

We established AGFWave Asset Management, a new joint venture with WaveFront Global Asset Management to deliver our investment capabilities to China and South Korea. We continue to drive the firm towards sustainable organic growth.

Our mutual fund business moved into positive net sales, and our institutional business has several large prospects in the pipeline. In addition, AGF and our funds were recognized with multiple awards during the year.

AGF was named Employer of Choice, Silver Award to the well professional awards in September. And several of our funds received Fund Grade A Plus and Lipper Fund Awards.

We advanced our strategic priorities while maintaining expense discipline. SG&A for 2020 is $5 million lower than our guidance of $180 million.

Excluding Smith & Williamson, we reported adjusted diluted earnings per share of $0.42 for the year, which is 5% better than the prior year on a comparable basis. The board confirmed a quarterly dividend of $0.08 per share for the fourth quarter.

And starting on slide six, we'll provide an 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 $38.8 billion. Mutual fund AUM increased by 5%.

And I'll 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 that we disclosed in previous quarters.

First Q3, AUM increased by 4%. As indicated on the previous earnings call, we received an allocation of approximately $125 million from an existing strategic partner.

Looking ahead, the committed pipeline for institutional and sub-advisory is currently negative $270 million. We have some committed redemptions from a value token strategy that is currently at favor with investors.

We believe that value investing may be more rewarding for patient investors over the coming years. While we are disappointed with the committed redemptions, we're seeing positive sales momentum across several key strategies.

In the U.S., a small institutional mandate funded in January, and we are currently in the final stages of onboarding two large institutional clients who have selected four of our global equity investment strategies for sub-advisory and SMA mandates. While the AUM growth from these mandates will occur gradually over time.

These wins demonstrate that our recent investments in the U.S. are starting to pay dividends.

We are seeing strong interest in our global sustainable growth equity strategy, which is one of the longest tenure in Canada, and has outperformed the benchmark by almost 500 basis points on a one, three and five year basis. RFP and RFI activity for this strategy has been strong, which bodes well for future sales.

Given the increased interest, we're seeing across multiple strategies and jurisdictions, we are confident about our ability to generate sales within the institutional segment. For our ETF business, our suite of Canadian and U.S.

exchange listed funds has seen strong growth over the past year. AGF was recently named Best Smart-Beta Equity ETF issuer at the 2020 ETF Express U.S.

Awards, which reflects our strength in factor based investing. In October, we launched two actively managed ETFs in Canada as we move to become increasingly vehicle agnostic.

AGF Global Sustainable Growth Equity ETF, which trades under the ticker symbol AGSG, is the ETF version of our Global Sustainable Growth Equity Strategy, which we just highlighted. AGF Global Opportunities Bond ETF, which trades under the ticker symbol AGLB is a newly actively managed global fixed income strategy.

We anticipate strong flows into these products given the growing demand for sustainable investing and fixed income. Our private alternatives AUM was $2.8 billion, which is a solid progress towards our goal of reaching $5 billion by 2022.

Turning to slide seven, I'll provide some detail on the mutual fund business. After a difficult spring season, the Canadian mutual fund industry continued its trajectory of improvement, reporting net sales of $11 billion during our latest fiscal quarter.

AGF mutual fund business reported net sales of $88 million for the quarter, excluding net flows from institutional clients invested in mutual funds, net sales were $66 million compared to net redemptions of $181 million in Q4 of last year. AGF sales improvement has outpaced that of the industry.

Gross new money flowing into our long term funds increased 37% year-over-year, compared to a 21% increase for the industry. The positive sales momentum has continued into Q1 and we are seeing strong inflows across multiple categories which is encouraging.

As investors continue to move away from domestic strategies toward global and international opportunities, AGF is well-positioned to capture this trend. Before I return 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 first percentile being best possible performance. We targeted an average percentile ranking versus peers of 50% over a one year period, and 40% over three years.

Performance was stable over the last quarter, average percentile rankings over the past one and three years, was 41% and 53%, respectively at the end of Q4, compared to 42% and 51%, respectively at the end of Q3. A number of our global and fixed income strategies continue to outperform versus peers.

In November, AGF U.S. small mid cap fund and AGF global convertible bond fund and Lipper fund awards for three and five year performance.

This is the second year in a row that the AGF U.S. small mid cap fund has received this honor.

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

Thank you, Kevin. We've made a lot of progress in 2020 to position ourselves for profitable growth in coming years.

We continue to exercise expense discipline, with SG&A coming in $5 million lower than our initial guidance and lower than prior year. Our retail line of business is driving towards sustainable organic growth, and we made further inroads with our private alternatives business.

September, expanded our partnership with SAF Group to enhance our private credit capabilities, while also securing the opportunity to increase our ownership in SAF over time. Our expanded partnership marks an important step towards our goal of reaching $5 billion in private alternatives AUM by 2022.

And it's consistent with our objective to generate more sustainable recurring management fee earnings. As Kevin mentioned earlier, together with SAF Group we'll be launching several innovative credit products in 2021.

In coming months, we will launch a private credit strategy aimed at institutional and high net worth investors followed closely by a trust fund targeted retail investors. The retail fund will have more liquidity and enhanced redemption privileges.

These products will allow us to meet the needs of our clients who are demanding access to uncorrelated asset classes in the face of changing market dynamics. Moving on, slide eight reflects a summary of our financial results for the fourth quarter with sequential quarter and year-over-year comparison.

For ease of comparison, we've included adjusted numbers and restated prior period results for IFRS 16 throughout the remainder on this presentation. Excluding Smith & Williamson from current and prior period results, even before commissions for the current quarter is $31.6 million, which is $10.3 million higher than Q3, 2020.

The improvement is due to favorable AUM, timing of SG&A and higher earnings from our private alternative segment, which is becoming a bigger portion of our business. Our private alternatives business contributed EBITDA of $7.1 million this quarter.

This includes LP earnings of $5.5 million and carried interest revenue of $1 million. That's one of our private alternatives funds exceeding its performance threshold.

As we continue to grow our private alternatives platform, management fee profits and earnings from our LP investments will become more consistent and predictable. Before I leave the slide, I'll address our SG&A guidance.

Over the last three years, we've reduced our expense base by over $20 million. Our achievement and efficiency has come at a time when we're also investing a significant amount of resources to new emerging growth areas, including private alternatives, global and quantitative investing and ETFs.

Today, we're announcing SG&A guidance of $180 million for 2021. This assumes a return to net sales for our retail organization.

This is flat compared to our original guidance for 2020. And it assumes limited travel and entertainment for most of 2021.

Before I leave this, I'll remind you, our SG&A guidance does not include any acquisitions and it assumes performance at its current trajectory. Further improvement in sales, our investment performance can result at higher variable compensation expenses.

Turning to slide nine, 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 revenue AUM in the current quarter as well as the trailing 12 month view.

Note that AUM and related results from Smith & Williamson, Private alternatives business, one time items and other income are excluded. Key for revenue yield is 114 basis points.

That's three basis points higher than the trailing 12 months. As you can see on the slide, the increase is mainly due to shift towards our mutual fund products with relatively higher fees.

Q4 SG&A as a percentage of AUM was 50 basis points, which is one basis point lower compared to the trailing 12 months which resulted EBITDA yield of 28 basis points compared to 25 basis points in the trailing 12 months. Turning to slide 10, I'll discuss free cash flow and capital uses.

This slide represents the last five quarters of consolidated free cash flow on a trailing 12 month basis, 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 months free cash flow was $46 million and our dividend payout ratio was 53%. Including dividends, the NCIB and SIB, we've returned $70 million to shareholders in the past year.

Sales of Smith and Williamson has provided additional capital flexibility and further strengthen our balance sheet. As of November the 30th, we have cash of $94 million, short and long term investments of $170 million and no debt.

The strength of our balance sheet allows us to pursue initiatives that will increase our earnings and free cash flow. Redeploying this excess capital is a key strategic priority.

Turning to slide 11, I will turn it over to Kevin to wrap up today's call.

Thanks, Adrian. Despite the challenges posed by COVID-19, we made substantial progress against our stated objectives in 2020.

With the sales of Smith & Williamson now complete, we have repaid our long term debt returned $40 million to our shareholders to SIB and are well positioned to pursue growth initiatives. We continue to develop a private alternatives business with multiple milestones achieved during the year.

Our retail distribution team closed the year with positive sales momentum that have carried into the New Year. We maintain expense discipline while investing in new areas of growth.

Along those lines, I'd like to reiterate our strategic priorities which are to deliver consistent repeatable investment performance, drive the organization to sustainable net inflows, position the firm to reach $5 billion in alternative assets by 2022. And meet our expense guidance while continuing to invest in key growth areas.

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

Thanks. Good morning.

First questions on the net flows, I guess both from retail and institutional side. Just wondering if you can provide a bit more color on the retail flows.

I know you provide it quantitatively what that was first couple weeks of December. Just wondering if you have more up to date number so far in Q1.

And then as well on the institutional side, just want to clarify the 270, Kevin, that you mentioned was that something that's in Q1? Just want to double check that, please?

Sure. Why don't I start, Gary, and then I'll pass it to Kevin to elaborate on the institutional.

In terms of the retail we continue to see strong flows across a broad range of the funds, which is very encouraging. As you noted, we did pre-release numbers, so that at the end of December 9, we showed 2020, we showed $15 million in net sales.

To the end of December, we saw $58 million in net sales. And then for January 1 to end of day yesterday, we've seen flows of net positive $74 million.

So for AGF fiscal year to-date, we are seeing $132 million in net sales. I think what we're looking to is just seeing the year-over-year improvement, which is close to $450 million.

And when we look at some of these other interesting metrics, like gross sales overall, we were up 85%. And when we look at the gross new money flows, which is you know, is sales, excluding transfers within a contract, AGF is outpacing industry by more than two times at this point.

So we're really encouraged by what we're seeing.

Yes. And Gary, its Kevin on the second question on the outflow.

We do have a couple of strategies. We have a number of strategies that are fundamentally based that actually have valuation methodologies inherent in them.

And as you saw over the last few years, those strategies, whether they be core but have more tilt to a valuation methodology, well underperformed the peer growth market that we saw. Interestingly, at its peak last year, growth, generically overvalued was almost a 40% spread difference.

You saw that start to reverse in September when the market started to broaden out. And that strategy has actually done quite well since then, actually, since mid year.

Now, having said that, when you underperform because of your style, some investors are going to want to basically change gears. And so, we know that, and we've seen some redemptions there.

But the process has been one that we've had around and the manager for probably in 20 plus years. And so we're pretty confident that we can weather that.

Value, we think is probably a place that we'll start to gain more traction. So we like having it in the mix.

But we know that some clients are going to weary of some style variances when they get to be that way as we saw last year.

Okay, Kevin. Is that going to come out in Q1?

Or is that going to be later in the year?

That's going to be Q1.

Okay. And then, Judy as a follow-up.

Can you elaborate where you're seeing the flows come from in terms of channel? Is it from your strategic partners?

Or is it elsewhere? Just bit more color would be helpful.

Sure. I mean, what we are encouraged about is the fact that it is really across a number of all of our different channels.

So we're seeing the improvement, both NFPA and IROCK [ph]. And the advisor activity and engagement with our sales team has been and remains to be extremely high.

So not only just strategic partners, but also, as I would say, advisors across both NFPA and IROCK channel.

Hi, Gary. Just one more thing.

Its Kevin, if I can add on that. If you go back to page seven on the deck that we presented for the earnings, and the chart on the right hand side.

And if you were just kind of have to just pencil in where we are year to-date just in this first one and a half months, you can see the pattern has not been haphazard, it's been a pretty logical step function upward. So that gives us some confidence on the momentum.

Okay. That's helpful.

And then my second question, maybe for Adrian, I noticed that the DSC expense line was a bit lower. Any color on that in the quarter?

Is it just a higher sales mix into non-DSC funds, like what's anything that's driving that?

Yes. Thanks for the question, Gary.

Yes, that's absolutely what's happening because of the diversity of sales. We are seeing DSC as a percentage of gross sales decline.

So just to give you a little bit of context around that. In 2019, our DSC sales were about 43%.

For the full year 2020, DSC sales were about 40% of our gross sales. And for Q4, 2020, they fell down to 33%.

So another kind of positive trend, similar to the comment that Kevin made, we can kind of see that progression over time. So that leads us to believe that that's kind of a sustainable trend line there in terms of decreased amount of DSC sales.

That's percentage of our overall gross sales, which I think is encouraging.

Okay.

Adrian's referencing that as a total mutual fund sales. If you think about the company, because the fact that funds are roughly half, it's a much lower number.

And then maybe just last question, Kevin. Cash balance $94 million, like you mentioned.

Can you walk us through kind of use the capital priorities for the next 12 to 18 months? I guess, related to this, how much is earmarked for the private outside including the new fund launches, Adrian mentioned.

And you sound pretty confident hitting the $5 billion over the next couple of years?

Yes. I mean, Gary, we're happy with the strength of our balance sheet.

It's nice to sit here with net cash positive. We've returned, as I think Adrian said in his comments, not just the $40 million in the SIP.

But when you add up the NCIB earlier in the year and the dividends, probably $70 million to shareholders. So as we go forward, I think a balanced approach is still appropriate.

So we'll be opportunistic on the NCIB. But we'll look to return capital to shareholders.

But most of its going to go back to both one and growing the organic parts of our businesses, as we're seeing, how do we bolster that. But two probably the bulk of it will go into that alternatives plank where we see opportunities, because the fact that investor appetites for alternatives are growing.

We can take a spectrum approach to it, meaning, liquid alternatives at one and private alternative to the other. And we can use that broad distribution base that we have with just as retail for the liquid side.

Maybe the larger IROCK books for more OM [ph]. And then really for our institutional family office, something that's a hybrid or even more private.

So I think using the capital and putting it back into that plank is probably the highest growth opportunity we have. I think the timeframe as I've said, probably something that looks like 18 to 24 months, we want to be disciplined about it, thoughtful.

But in terms of targeting a specific dollar amount to each yet we haven't gone that far in terms of giving that out yet.

Okay. That's helpful.

That's it for me. Thank you.

Hi. Good morning.

So you mentioned that there is some institutional relative value bet strategies that should be redeeming in few ones. But I think you also mentioned you're rewarding some the mandates in the U.S.

Did you quantify that? If so that I missed it?

Could you get some color on what the offset is?

Yes. So we're looking at about an offset over the next few quarters, somewhere between $100 million and $200 million.

At the beginning these are built out mandates on a platform. So as the flows increase over time, we would expect to see a cumulative growth of assets on those particular mandates.

But as I say, in the short run the next couple quarters, we'd expect a couple 100 million.

Got it. Did you mention what the redemptions that are coming through on the value strategies are?

We did. I think on the earlier comment that was about $270 million as the committed negative pipeline right now.

Yes. And Graham, its Kevin.

I just would reiterate. It's a strategy that as the markets have grown growth here, while it's a core strategy.

It finds the index getting to tip more to the right towards growth. And it does use a disciplined approach to thinking about how to value companies.

So obviously, it's been out of favor, but it's not, I wouldn't classify as some people think of deep value [ph] or value, okay.

Got it. Okay.

And then, I think you mentioned previously that you've got a $15 million commitment to cede some of these new private credit funds with the SAF Group. Does that capture everything that you're planning to do with them?

Because I think you mentioned that you're focusing on a few different channels like, institutional, high net worth and also retail or is there -- is the capital required to get all those funds and channels going isn't higher than the 50 million?

Yes. I'll start, maybe I'll get Adrian to follow up.

But on that first fund, we're probably looking at somebody a little lower than 15, that that should get that off the ground. And as we've talked before -- as you see successive funds with the manager, you tend to have to put in less than less than less.

So the first fund is always the most. Second funds a lot less.

The third funds much more less, if that's word. But you'll see us recycling capital from other funds over time.

So -- and I think, Adrian, maybe you want to add some color to this, but we don't see it as a large incremental drive over what we've told you guys in the past. But as we launch further funds with SAF, we should be monetizing assets from prior funds to see some of those funds.

So it's not as if this is unending drain on capital to get this going.

Yes. I agree.

It's Adrian. That's precisely, obviously, if we start to build new types of capabilities that might require a bit more capital.

But with our business kind of more seasoned where we're recycling a lot of capital. And as Kevin mentioned, successive funds, it's kind of an industry thing.

They do require less capital.

Okay, understand. Have you -- this will be my last question.

But have you -- do you have a target for what you're trying to raise through these new funds with the SAF Group?

Hey, Graham, it's Adrian. Yes.

So we try not to give out fund by fund targets, because it's a little bit too detailed. But we do have that $5 billion target out by 2022.

So that's kind of how we look at it is. We set an overall target, and then we've got a variety of different kind of strategies to try to reach that target.

Okay. That's it from me.

Thank you.

Okay. Thanks.

Good morning. So with the Smith & Williamson transaction complete, you've got no debt, and you also have some flexibility to deliver as well if necessary.

In that context, I'm wondering what your appetite for M&A might look like. And maybe the way that I'll ask is, whether that's something you would just evaluate in normal course?

Or whether M&A might be something that you're more inclined to proactively seek out at this point?

Yes, Nick, it's Kevin. As I've said, we like the balance sheet the way it is, but there's an appropriate amount of leverage that a company should have.

Over time as we see opportunities that exceed our cost of capital probably in the alternative space. You'll see us re-levered the company back up to one-to-one and a half times, which I think is the appropriate level.

And if we do that, right, that should be fairly creative. But I don't think you need to think about anything transformational.

We're going to stay on strategy. We like the model that we've got in terms of alternatives, which is partnering with folks.

And thinking about our income stream from not just being an LP investor, but being part of the management fees coming in as well as some of the carry. So, don't think of us having to try to do something large scale.

But there may be things that we would invest in the tuck in around our core businesses as well to drive future organic growth. But I would say, we're not thinking large scale M&A at this point.

I don't know if Adrian, do you want to add anything to that?

I have nothing to add. That's it.

Okay. That's helpful.

Just one other from me. I just wondering if could help quantify what you consider to be excess capital in the business?

And maybe the way I approach it, is there a minimum level of cash that you'd like to have on balance sheet to kind of comfortable operating with for working capital purposes where anything in excess of that should be considered available to be allocated either through capital return or see the new strategy -- strategies or other uses?

Yes, sure. So I guess I'll take a stab at that.

There obviously is working capital required to run the business. But we don't necessarily need to have it in cash.

Because we do have a revolver that we can draw from, but we'd probably like to keep, $30 million to $50 million of cash just for pay your in bonuses and that kind of thing. But you got to step back and think.

We've got zero debt. We've got $94 million in cash at year end.

We have $150 million of long term investment. And we could borrow a couple $100 million and still keep within a reasonable debt to EBITDA.

So, that type of balance sheet, we're not really thinking about keeping enough cash to pay the bills, because we just have so much liquidity. We're obviously going to be really smart and disciplined about how it gets deployed.

But we're thinking more so about the capacity to use that to grow.

Okay. That makes sense.

Alright. That's it for me.

Thanks very much.

Hi, good morning. My first question was just with the increased focus on ESG.

I know your financials kind of talk about what you're doing at the corporate level in various forms on that. But can you talk about how you position today?

Where you may want to evolve over time both from an investment standpoint, but also from a product standpoint?

Yes. Hi, Jeff, it's Kevin.

I'll take that. I think as you know, we were on one first firms.

The sign of PRI here, probably its going on five years ago now. We have ESG running through all of our investment processes.

Today, we have -- get very high grades in our PRI annual scores. So at the firm level, we've adopted and now that we have a sustainability counselor, Judy is President of the firm, it really is overseeing the firm's view of ESG on top of what the investment view is.

In terms of the product landscape, we probably have one of the largest -- I'm sorry, longest, tenured ESG, specific mandates, probably in North America, which has been performing phenomenally. And as you can imagine, not just investment performance, but also flows.

And because of the fact that I think that this is a theme that we've talked about many times on this call, that's not going away. You've seen us launched in the last part of last year, an ETF that mimics that strategy to some degree.

So again, as we start to become more vehicle agnostic, we want to deliver things that are not just funds, but in ETFs, but also an SMAs where that also can be applied. And so, you'll see us bring more and more offer to bear here.

But it's something that we've been focused on for a number of years.

Okay. And then on the OpEx side, on our run rate or annualized basis, given but near then COVID-19 impacts from last year, assuming higher technology, lower travel, like what would have been that net-net amounts?

And then when things eventually normalize how much of that -- I'm assuming net savings, do you expect to come back into the OpEx versus what might be more permanent lower expenses, all else equal?

Hi, Jeff, its Adrian. Thanks for the question.

Yes, you're probably right, in a sense that there's a savings for us, it might be $5 million related to just reduced activity. But then you're right, also in the sense that there's some offsets around technology and that kind of thing.

So, it's maybe a few million dollars less than that. That's a sustainable increase over time.

And that's also going to depend on behavior changes, right, like we -- it's still left to be determined, whether we go back to pre 2020 activity as far as travel and meals and entertainment, so that'll play out over time. But we basically assumed in the guidance that we gave you that later in the year, we kind of returned back to a normal meals and entertainment type of environment.

And that's kind of our best guess for 2021.

Sure. Okay.

And just my last question is, I know you've talked a fair bit in terms of the institutional business in terms of what's going on in the current quarter and then upcoming, but what would have been the institutional net sales in Q4, but also for the fiscal 2020 period?

Jeff, we're going to pull that up right now. But we were in net outflow on institutional business for most of the year last year for that value strategy, which was our global core strategy that we talked about earlier on the call.

We had a couple of similar type redemptions early on in the year. But that's where it was centered.

And we think that that's starting to stabilize now, though, as I've said, as you're seeing this shift from value, but I don't know, if Judy or Adrian, has that number.

I was just going to also comment, though, that we were repositioning our U.S. business under new leadership.

So our sales team now has been fully ramped up. And that's where we have quite a degree of competence and the opportunity in the U.S.

And so net outflows last year, I actually I apologize, I don't have that exact number, but it wasn't an outflow number.

We will get back to you before you're on that Jeff. Okay?

Okay. Just thank you for that.

It was the same strategy that we just talked about earlier.

Correct. Okay.

Excellent. Thank you.

Yes. Thanks very much morning.

Two quick questions here. One, if we look at sort of management, and advisory fees, as a percentage of AUM, we get the similar story to what you have there on slide nine, that was higher in the fourth quarter versus the third quarter, and certainly higher in the fourth quarter versus the first and second quarters of this year.

And I think you had said it was in part due to maybe changes in mix. Seems like maybe a little bit more in terms of some mutual fund business that had helped that.

So how should we be thinking about that just in terms of basis points going forward? Is it the current mix, should that stay the same?

How do we work that in with any kind of further few compression? And then I have a follow up.

Yes. Hey, Tom, its Kevin.

I'll let Adrian to follow on that or Judy. But it has been mix shift.

We have more of an equity sales. We've seen -- we have a number of well performing strategies right now.

It's a broad set of things that are performing really well, which are attracting sales. So as people have moved away from fixed income, they've redeployed back into equity.

So it is some mix shift going on there. I still think, when you look at the industry, over the last several years, this is more anecdotal, Tom.

We haven't seen the big fee cuts that we've seen before in the industry. And so, I think that is starting to level off, but my gut tells me, which is so be thinking one to two basis points.

I'd say the last piece is we've seen people starting to shift away from index products, not wholly, but back to active management in here, which will also you'll see some firms who have that kind of and it's not us, we don't do the index suite here. But those firms are also going to see a lift in that as this folks move away from their index suite back to an actively managed suite.

So there'll be some mix shift for the industry for sure. I think.

But Adrian, if you have any other thoughts on the one or two basis points?

Yes. That's accurate, Kevin.

Its coming from mutual funds. And we've had some really successful products made, it's been a very broad story as far as which funds are producing the net sales, but they have tended to be our more differentiated equity type products.

And then we've had some redemptions in products that have slightly lower fee rates. So I think it's another encouraging trend.

Go ahead, Judy.

Yes. Just to feed on that, I mean, it really is around our exposure on the global side, and the fact that we've got higher margin products on that side of the business, our GSG fund is trending very well, again, performance is helping enormously on that fund, our global select fund and even the convertible debenture fund.

So it's been a good long leg, as we've talked about, the breadth and depth of our suite of products are selling has been very on.

Okay. So that sounds like one to two beats.

But if trends shifted to more index and away from active or towards more kind of balanced or fixed income based funds and that could be perhaps a little bit more. Maybe as a -- and then the second question has to do with the share of profits that you got from your JVs in the quarter, $1.6 million.

How should we be thinking about that going forward? Is that a proxy for like a $2.8 billion alternatives and if you moved it up to $5 billion alternative.

So we just sort of just keep moving that up accordingly?

Yes. Thanks, Tom.

It's a little bit difficult to model to be honest with you. So we are trying to make it little bit easier for you.

And if you look on page five of the MD&A, breaking out the alternatives business showing what we're earning from the manager versus what we're earning, investing in the LPs. And so, you will see, obviously, as the platform gains more scale, you're going to see more of a consistent and repeatable amount of profits coming from our interest in the GPs/managers.

But again, I've explained this a few times in the past, just the way the accounting works for alternatives. And this affects all firms that have sizable alternatives, businesses, you have to accrue carry, unrealized carry as an expense, right.

And so that ends up limiting the amount of profits that you can show. At the same time, this unrealized carry, you don't realize the income from the carry until it's actually earned.

So it can kind of create a distorted picture because of equity accounting. But one of the things you can do is look at our cash flow statement, and also note five, and that's going to show you like the cash that we get from the managers.

And that might be a better way to look at kind of the recurring income generating power from our interest in these managers. And if you look at note five, you'll see that we received about $3.7 million in cash.

And so that's kind of the number that I would have you look at. Just keep in mind, though, that after tax, that's net of everything, right?

So it's not an EBITDA, its just far down on the income statement as you can go. And then that's 3.7, obviously, is probably the one that you'll see grow consistently over time as we move towards that $5 billion target.

Okay. Thanks for the help.

You're welcome.

Yes. Just to follow up on -- appreciate the color that you gave on the institutional and mutual fund.

How about on the high net worth side and your ETFs. Just some color on the flows would be appreciated?

Sure. I mean, the private client business is incredibly stable, its close to flat year-over-year.

And it performs -- continue to perform well with steady referral business in terms of new sales coming in. In terms of the ETFs, we saw about year-over-year about a 7% increase on our total AUM.

We're confident about the product offerings that we have within that suite of products, as you know, we offer both actively manage and factor based ETFs. Our market mutual anti-beta strategy is used as a tactical play.

And so we'll see a lot more movement in and out of that particular ETF, but it's doing exactly what it's designed to do. And then we -- I think, Kevin mentioned that we did just launch a global sustainable growth ETF, which is really trying to harness the opportunity and take advantage of the opportunity.

That's really the appetite that we're seeing advisors and investors looking for. So we've seen immediate traction on that, and that was just launched last fall.

So again, we're looking for some sustainable traction in that space.

And Graham, its Kevin. Just to follow up on that.

We're seeing advisors again, as we have a very broad set of channels that we're in. So some are fund based, some are increasingly ETF based, some are ETFs and funds and some are using SMA.

So we have to be positioned to be true as I think about a vehicle agnostic as we head into the future. It will take us a while to get there.

So but ETFs will play a role in that as again, offering a capability and letting the advisor pick the wrapper.

Okay, understood. And in SMA, would that come through your institutional flows?

Or would you capture that as a retail mutual fund flow?

I think, Adrian, those are coming through in retail. Correct, Adrian?

So, it kind of depends what report you're looking at. So, if we give a…

So its usually institutional. SMA usually does show it with our institutional members.

Yes. If you're looking at our MD&A that's where it's going to come through.

Yes.

That's it for me. Thank you.

Thank you.

Thank you. Thank you, operator.

So thank you very much for joining the call. And you can find the conference call and webcast archive on our webcast.

And we'll look forward to seeing you again when we report our first quarter results. Thank you very much.