IGM Financial Inc.

Thank you. Good afternoon, everyone, and welcome to IGM Financial’s 2022 first quarter earnings call.

Joining me on the call today are James O’Sullivan, President and CEO of IGM Financial; Damon Murchison, President and CEO of IG Wealth Management; Barry McInerney, President and CEO of Mackenzie Investments; and Luke Gould, Executive Vice President and CFO of IGM Financial. Before we get started, I’ll like to draw your attention to our cautions concerning forward-looking state statements on Slide 3 of the presentation.

Slide 4 summarizes non-IFRS financial measures used in this material. I would highlight on Slide 4 that added non-IFRS ratios to our non-IFRS financial measures.

On Slide 5, we provide a list of documents that are available to the public on our website related to the first quarter results for IGM Financial. And with that, I’ll turn it over to James.

All right. Thank you.

Thank you, Keith, and good afternoon, everyone. Before I review our first quarter, I do want to acknowledge the situation in Ukraine.

Canada has a strong and lasting connection to Ukraine, contributions of Ukrainian-Canadians to the culture and prosperity of our country cannot be overstated. Our hearts go out to Ukrainian people impacted by this unjust war waged by Russia.

Turning to Slide 7. First quarter earnings were $0.91, an all time record high and a 7% increase relative to last year.

We also achieved the best first quarter net flows in our company’s history at $2.5 billion. And we continue to emphasize and deliver outstanding expense control during the first quarter with operating support and business development expenses growing only 2.1% relative to Q1 of last year.

And we are reducing our full year expense guidance to approximately 3.5% growth from the 5% previously. Quarter ending AUM&A declined 3.2% as our best ever RSP season net inflows were more than offset by the declines in both global equity and fixed income markets.

From a capital allocation perspective, we launched a normal course issuer bid during the first quarter and repurchased 570,000 shares for $26 million during March. And we used our automatic securities purchase plan to continue through April, repurchasing an additional 600,000 shares for $26 million.

Alongside our first quarter results, we published our 2021 sustainability report and I’ll share a few highlights on a coming slide. Now on March 1, we announced several leadership changes in the organization that I believe deliver strategic continuity succession and that further elevate this organization.

Barry McInerney has announced his intention to retire effective June 30, 2022, after over a 35-year career in the industry in Canada and the United States and nearly six years leading Mackenzie through a period of exceptional growth. Luke Gould, whom you have all had the opportunity to get to know very well on these calls, and over his 25 years with IGM Financial will become the President and CEO of Mackenzie effective July 1, 2022.

Succeeding, Luke is Keith Potter, another very familiar name to you, I’m sure, based on his work as Treasurer and Head of Investor Relations and prior roles including Head of Product at IG Wealth. Keith becomes IGM’s Chief Financial Officer effective July 1.

Kelly Hepher joins IGM Financial on April 1 in a newly created role of Chief Risk Officer where she will lead our enterprise risk and corporate sustainability programs, as well as administrative responsibility for our internal audit function. I’m very excited about these appointments and what they mean for IGM Financial.

These appointments speak to the depth and quality of the leadership that we have at our companies and the focus that we’ve been placing on succession planning. I look forward to their contribution as they take on these new challenges.

And so turning to Slide 8, markets have been very volatile during the first four months of the year, driven to a large degree by the war in Ukraine, combined with concerns over inflation and rising interest rates across major global economies. While Canadian equity markets managed to deliver a positive total return during Q1 driven by resource exposure in the index, most global equity markets experienced negative returns during the quarter.

Fixed income markets in aggregate also suffered losses. In fact, the 7% negative return for the FTSE TMX Canada Index was the worst quarterly return experienced over the 40-year history of the Index driven by rapidly rising interest rates coupled with inflation concerns.

This outlier event is causing a shift in product demand away from traditional duration products towards floating rate or other low duration solutions within the investment fund industry. Turning to Slide 9 on the overall industry net sales following an outstanding 2021 for the industry, we’ve seen a decline in overall investor sentiment during the past couple of months, relative to the very high level seen last year.

First quarter long-term mutual fund net sales for industry asset manager peers were $7 billion, slightly above the average, but down from $18.8 billion during the same period last year with noticeably limited sales into income oriented strategies. All that said, as we see volatility in the markets, we believe advisors can use this opportunity to work with our clients to navigate the current environment.

This includes conversations on understanding the impact of rising inflation, discussing the importance of a well construct investment portfolio and the opportunity to invest money that is otherwise being sitting on the sidelines. Turning to Slide 10 on IGM’s results.

Average AUM&A increased 10.5% year-over-year and net earnings increased 8%. Slide 11 highlights how IGM’s earnings growth was driven by increases across all three of our segments, wealth management, asset management, and our strategic investments.

Turning to Slide 12. We saw strong net inflows across IG Wealth, IPC and Mackenzie investments.

And you will hear more on the strong fundamentals of these businesses in remarks from Damon, Barry and Luke. On Slide 13, I’d like to highlight IGM’s Annual Sustainability Report released today.

We prepare this report for all stakeholders, but also to address the ESG needs of our investors, analysts and ESG community. We are committed to transparent disclosure and you’ll find we include both TCFD and SASB disclosures in our report.

In line with the theme of this year’s report bettering lives for tomorrow, we have forged ahead with our sustainable priorities of building financial confidence, advancing sustainable investing, accelerating diversity, equity, and inclusion, and supporting adjust transition to a net zero economy. IGM’s commitment to ESG and sustainability also continues to receive recognition in the marketplace, including IGM’s inclusion in Corporate Knights’ Global 100 Most Sustainable Companies published earlier this year.

The appendix of this presentation contains some additional highlights from the 2021 report. So I’d encourage each of you to take a look at the full report available on our website.

And with that, I will turn the call over to Damon.

Thank you, James, and good afternoon, everyone. Turning to Slide 15 and IG Wealth Management’s first quarter highlights.

We ended the quarter with AUM&A of $116.3 billion, a decrease of 2.7% during the quarter as a result of financial market declines. $1.5 billion was another record high in terms of net flows for Q1 and net sales into IGM managed products of $1.3 billion was our best Q1 in over 20 years.

We have continued our strong positive momentum in the high net worth and mass affluent segments of the market, where inflows from newly acquired clients over $500,000 increased 41% year-over-year in Q1, 2022. I’ll speak to our new product launches on a coming slide.

And at IG Wealth Management, we’re proud to be recognized as a top employer in this country and for stronger results we achieved in the 2022 J.D. Power investor satisfaction survey.

We’re ranked above each of the big five bank full service brokerage firms. Turning to Slide 16.

You can see our record high Q1 results and continued strong momentum. We’re also pleased with our strong net flows last month.

To put April into perspective, March and April is typically a period where we have significant focus on working with our clients on tax planning and optimization. Because of this, only three Aprils in the last 15 years have had positive net flows, including both April 2021 and 2022.

April also marked the 19th consecutive month of positive net flows for IG Wealth. Turning to Slide 17.

In Q1, 2022, we achieved an all time record high gross and net flows of $4 billion and $1.5 billion respectively. Our net inflows are broken down in more detail in the net flow’s table, where you can see that our $1.3 billion of net sales into IGM product during Q1 increased $556 million year-over-year.

We believe we’re winning market share today with our trailing 12-month net flows rate reaching 3.6% during Q1. Turning to Slide 18.

While we’ve been growing our share of wallet with our existing clients, this slide highlights how our new client acquisition is really driving our success. As you can see on this slide in Q1, 2022, we’ve continued our strong momentum with gross flows from newly acquired clients, increasing 20% on a one year basis and 86% over a five-year basis.

On the right hand side, you can see the continued success we’re having in terms of high net worth and mass affluent client acquisition quarter after quarter. The increase in new client acquisition continues to be a significant contributor to overall gross net flows momentum at IG Wealth, Turning to Slide 19.

We continue to showcase our momentum and accelerating advisor productivity. Both our newer advisors and more experienced advisor practices are demonstrated continued growth driven by the hard work of the advisors in the initiatives we have undertaken to further expand their capabilities and business potential, which you can see on the right hand portion of this slide.

Turning to Slide 20. During April, we launched in collaboration with Mackenzie investments in BlackRock, two new suites of products that aim to provide clients with comprehensive diversification for their U.S.

dollar based investments, including an innovative first of its kind solution that helps simplify the U.S. tax reporting process for Canadian residents who pay U.S.

taxes, which is often complicated and costly. These launches further elevate the product shelf we offer to a high net worth clients in Canada.

Lastly, turning to Slide 21. I’d like to take a few moments to highlight some of the recent recognitions IG Wealth Management has achieved.

In terms of advisor engagement in the most recent investment executive dealer report card, we improved in 26 of the 31 categories, and we’re the only dealer to improve year-over-year. With respect to employee engagement, we were recently named a top 100 employer across Canada and in Manitoba for our strong employee offering and value proposition.

And in terms of client satisfaction, J.D. Power just published its 2022 Canada full service investor satisfaction study.

And I’m pleased to announce that IG Wealth has improved to sixth in their overall customer satisfaction index, ahead of both the industry average and each of the full service brokerage arms of the five big banks. We believe this further demonstrates our attractive client value proposition.

It’s very exciting for us to have a high level of advisor, employee and client engagement driving our underlying business results. I’ll now like to turn the call over to Barry McInerney.

Thank you very much, Damon, and good afternoon, everyone. I’ll take us to Slide 23 to review Mackenzie’s Q1 results.

Total AUM of 205.5 billion as of March 31 was down 2.3% during the quarter due to negative investment returns of 5.1% partially offset by strong positive net sales at $873 million. First quarter investment fund net sales of $1.3 billion for the second best on record and Q1 mark our 22nd consecutive quarter, a positive retail investment fund net sales.

This quarter, we launched several new funds with a focus on sustainable investing and alternative solutions. And I’ll speak more to the progress we’ve made in the sustainable investing arena in a moment.

I’ll also discuss the Q1 operating environment for the China asset management industry on a coming slide, as well as an important development for the industry that is very positive for mid to long-term growth. Finally, Northleaf continued to see strong fundraising with $1.1 billion of new commitments during the first quarter.

Turning to Slide 24, where we outline a trended history of Mackenzie’s net flows. As mentioned on our last call and reiterate by James today, 2021 was an extraordinary year for net sales in the Canadian investment fund industry.

The industry environment in 2022 is presenting shifting challenges and opportunities with overall industry flows, resetting, and a mix of flows that is evolving noticeably. We continue to adapt and pivot where necessary to position Mackenzie to compete and win market share and to deliver strong near and long-term growth.

The chart in the top left corner compares our Q1 adjusted investment fund net sales of 625 million to prior periods. Outside of Q1 of last year, 625 million represents the best Q1 in over 20 years.

And I note that this figure excludes 675 million of net sales resulting from fund allocation changes at Wealthsimple during the first quarter. And Mackenzie reported investment fund net redemptions of 49 million for the month of April in line with what we’re seeing in industry for the month.

Slide 25 summarizes Mackenzie’s Q1 2022 operating results. Retail mutual fund net flows of 592 million were the second best in over 20 years down relative to last year, but up 412 million compared to Q1 2020.

Institutional investment fund net sales were positive 880 million, which includes contributions from Wealthsimple. Mackenzie continuously gain market share as demonstrated by our 6.1% long-term investment fund net sales rate as at March 31 and 52% of Mackenzie’s AUM rated by Morningstar were in four or five star funds.

And 15 of our top 20 mutual funds were rated four or five stars for series F. Slide 26 shows our retail mutual fund AUM, investment performance and net sales across our investment boutiques.

Our teams continue to deliver strong relative performance as measured by Morningstar and our retail sales continue to be broad based and diversified across investment strategies. Year-to-date 2022, we have seen value strategies, generally outperform growth strategies and we see this lift [indiscernible] short-term performance.

On the fixed income side, the net sales story has two distinct elements, duration products, and traditional fixed income categories experience net redemptions across industry during Q1 and Mackenzie experienced its chair. Offsetting this has been strength in low duration, fixed income strategies, such as Mackenzie’s floating rate, mutual fund and ETF solutions.

And we’ve observed continued sales momentum during April in these solutions and others on our shelf that are designed to perform well through a period of rising interest rates. Slide 27 shows the growth catalysts I’ve spoken to numerous times over the past six years or so at Mackenzie.

I’m so very proud of the progress we’ve made across all these growth areas. And thank the individuals and teams responsible for positioning Mackenzie exceptionally well to execute against each of these opportunities well into the future.

With this being my last time, joining this call, I’d like to take an opportunity to highlight one element that has been particularly personal interest to me, sustainable investing. This is an area of great importance and impact to our organization and the industry overall.

Mackenzie has been positioned as a leader in sustainable investing in Canada with a launch of over a dozen products focused on this space over the past five years. And we are set to publish our inaugural sustainable investing report later this month.

In terms of AUM, Mackenzie now manages $4.5 billion with specific sustainable investing objectives positioning us in the top four within Canada with approximately 80% [ph] market share. In addition, we’ve made significant progress building capabilities to better integrate climate and energy transition risks into our investment process across all of our boutiques.

Continuing on Slide 28, the overall Chinese mutual fund industry AUM was relatively stable down only 1.8% during the first quarter as negative investment returns were largely offset by continued positive net sales of 817 billion renminbi. Despite equity market declines of approximately 14% during Q1, net sales into long-term funds were still over 350 billion renminbi.

Money market funds also attract a strong net sales during the quarter and overall industry money market fund AUM increased 5.5%, while long-term funds declined 6.2%. ChinaAMC continues to rank second overall in terms of long-term mutual fund assets under management in China, and like Mackenzie has a diversified suite of investment solutions and benefits from broad access to distribution.

Turning to Slide 29. While on the topic of China, I wanted to focus in on the third pillar of China’s pension system – private pensions.

On April 21, China State Council released a policy document outlining its framework to further develop China’s pension system with the introduction of private pensions as a third pillar, supplementing the existing two pillars focused on government and corporate pension planning. We are encouraged by this important step in the development of China’s third pillar as a top asset management in China with a strong track record of innovation and deep experience managing pension assets.

ChinaAMC is very well positioned to execute against the opportunity in the coming years. And just to give you a sense for the size of this opportunity under this new private pension system, approximately 1 billion individuals will become eligible to make voluntary annual contributions of up to 12,000 renminbi into qualifying pension accounts.

The rollout and adoption of the new program will take some time, but the size of the overall market opportunity is significant and we are excited to participate in it by way of our investment in ChinaAMC. Lastly, on Slide 30, we are highlighting Northleaf Capital Partners $20.3 billion in assets under management and their strong growth across private equity, private credit and infrastructure asset classes.

And in Q1 of this year, Northleaf grew AUM by 4% driven by strong fundraising of 1.1 billion during the quarter. I’ll now turn the call over to Luke.

Thanks, Barry. Good afternoon, everyone.

On Page 32, you can see our AUM&A. The chart on the left does a good job of illustrating where we are at the end of April.

During Q1, AUM&A was down 3.3% due to negative market returns at 4.6%. And this was offset by record high net flows of 2.5 billion reviewed earlier by James.

During April, assets were down another 4% to 257.4 billion. We are made near these levels today and think towards Q2, you can see, we have AUM&A a slightly lower than the average balancing Q1 and slightly above the average balancing Q2 of last year.

Moving to Page 33, I have a couple of comments and you can see on the slide that presents our quarterly EBIT and millions of dollars on the left and as a percent of AUM&A on the right. On the left, I direct you to the second stack from the top where you can see that our share of associates earning and net investment income was 46.4 million, down 8 million from last quarter.

As you would’ve seen, including this line with $7 million reflecting mark to market of seed capital relating to market declines. I’d also note 2.5 million of this was included within ChinaAMC’s results and reflects our proportionate share of their seed capital mark to market.

On the right, you can see our margins. The key point I’d make here is to remind everyone that we have a number of seasonal items in Q1 of every year that has a depressing impact on earnings and are very hard to model.

I’m going to highlight a few of them here, and I’m going to speak a bit more to them in detail on the coming slides. First, our expenses are seasonally high in Q1.

You can see on the chart on the right, our unit costs of 44 basis points are down from 47 basis points in Q1 of last year. But of course, because of the seasonality are up relative to Q4.

Second, we have fewer days upon which we charge our revenues in Q1 than in another quarters. However, our asset based compensation to distributors and advisors is based upon one quarter of a year applied to an annual rate, as opposed to our revenues, which are based upon 90 days divided by 365 days applied to an annual rate.

And lastly, our insurance sales at IG are seasonal and they’re down $2 million from Q4. Q4 is our peak seasonal high period for insurance sales.

And so we do typically have this and well, we always have this reduction of coming into Q1. When we to Page 34, where you can see our consolidated earning statement for IGM.

At the bottom, you can see as reviewed by James, we had record high Q1 earnings of $0.91, up 7% from last year. Building on the comments from last slide, you can see we’ve highlighted in point one that the seed capital mark to market was $6.6 million as a result of financial market declines.

And that’s highlighted in the last slide. You can see that 2.3 million of this reflected our proportionate share of ChinaAMC seed capital mark to market.

In point 2, we are very focused on expense management during the quarter. Our ops and support and business development expenses were up 2% and we’re $9 million below our previous guidance.

You can see here in this point, we are revising our full year expense guidance to a 3.5% increase from 2021. And this is a decline of approximately $15 million to $20 million from our previous guidance.

That expenses would be up to 5% this year. And lastly, in point three, with our increase in year-over-year earnings, our dividend payout rate on a last 12-month earnings basis has declined a 66% of cash earnings.

And as described previously, we would consider a dividend increase at 60% of adjusted cash earnings. So while the payout rate continues to reduce, we are – as we’ve strengthened our earnings, we’re not quite at that 60% payout rate yet where we’d consider a dividend increase.

Turning to Page 35. You can see a summary of IG Wealth’s AUA and the key revenue and expense margins.

I’d highlight that on the top, right you can see our advisory fee revenue rate was a 101.9 basis points in the quarter. We’ve highlighted in the great italicized numbers right above that we made a reclassification this quarter of net interest income that we earn on client cash deposits to be included in this advisory fee line given a character the fact that it is driven as a percentage of AUA.

And this amount was previously included with the other financial planning revenue line and previously was trivial. Retroactive for this, you can see the fee rate declined by 25 basis points.

This is right in line with the earlier guidance and the 0.5 basis point decline reflects our continued success in development of high net worth client relationships as reviewed earlier by Damon. I’d also highlight that our asset based compensation rate was 49.2 basis points in the quarter.

You can see this was a 0.5 basis point increase. And this was as a result of continuing maturing of units, initially sold subject to a deferred sales charge.

I’d remind everyone that at seven-year maturity, the asset based compensation on these units doubles. I’d also remind that we discontinued sale of these products six years ago.

So this trend will continue right until Q4 2023. And following that all the DSC will have fully matured and this trend will discontinue.

Most importantly on the slide, I want to highlight and remind that our asset based comp is established and paid on a different basis than our revenues. The square rectangle box shows the rate if one were to annualize our asset based comp based upon the number of days in the period and using average – daily average assets in the denominator.

I remind that asset based comp is established monthly by applying a 112 amount to an annual rate each month, and then applying this to a simple average AUA balance. And the simple average is the open balance at the beginning of the month and the balance at the end of the month.

You can see in the bottom left, we’ve actually depicted what the simple monthly average AUA is in every quarter. And you can see it was 116.8 billion this quarter.

And if you go up that chart on the left, you can see that compares to 116.3 billion when one calculates a daily average balance. I know it seems odd to be spending so much time on these technical amounts.

But I would highlight back to the chart on the right, the different application of rates being 1/12 per month or 3/12 per quarter in the case of asset based comp versus our revenues being applied at a rate of 90 days over 365 for the quarter, as well as the different basis upon which we calculate an average has resulted a difference of 49.2 basis points in reality that we paid versus 50.1 basis points if one were to use the same basis upon which we are in our revenues. This 0.9 basis point difference is worth about $3 million in a quarter.

So it seems like a small amount these technicalities, but it can actually add to a large number if they aren’t modeled properly. I would also give guidance on this rate that for the rest of the year, you should expect it to gradually increase as DSC units continue to mature, and we’d expect the average rate to be about 49.5 basis points through the full year.

Turning to Page 36, IG’s earnings are up to 6.4% year-over-year. As mentioned earlier, comparison to Q4 or less relevant due to seasonal items, the one point we’d make here is just a highlight our focus on expense management.

Expenses were down 5.6 million relative to Q1 at 2021 at IG. I’d also note if you look at the net investment income and other line that we do have seed capital mark to market declines in each and every one of our segments, including IG Wealth.

Moving to Page 37, you can see Mackenzie’s AUM by client and product type, as well as our net revenue rates. I just have two quick comments in this slide.

On the right, focusing on the yellow, you can see the net management fee for third party clients is 53.2 basis points and much like our discussion at IG Wealth, it’s impacted by the same seasonality in asset based comp that IG Wealth was. When you exclude the seasonality and how we pay asset based compensation, the rate was actually 54.1 basis points down slightly from Q4 and that slight decline reflects a change the compensation towards the Wealthsimple ETFs which were sold during the period.

I’d also note that if you look at the bottom left, you can see the share of the wealth management AUM that Mackenzie’s advising to has increased from 69.9% to 71.9%. And this is the result of an award of business by IG Wealth to Mackenzie in the Canadian equity space within the iProfile program.

And that award was $2.5 billion. Moving to Page 38, you can see Mackenzie’s net earnings were up 8.6% from last year.

And you can see the only item that we’ve called out here is the seed capital mark to market of $2.5 million. On Page 39, you can see ChinaAMC’s results on the left total AUM of 1.6 trillion Yuan is up 4% from last year and down 4% from December.

At the bottom, you can see in the bottom stack, long-term funds were up 22% from last year and down 7% in the quarter. As reviewed by Barry, in spite of the financial market volatility industry net sales were both robust and ChinaAMC did gain market share during the period.

On the right, you can see IGM’s share of ChinaAMC's earnings were 15.8 million when you exclude the 2.3 million seed capital mark to market. And this was a healthy 25% increase from last year.

On page 40, you can see, Wealthsimple’s quarterly metrics. On the left in spite of financial market declines, we saw Wealthsimple’s AUA increased by 5.4% in the quarter due to continued strong client acquisition.

In the middle, you can see that Wealthsimple continues to deliver very strong growth with its number of clients at 1.665 million at the end of March, an increase of 8% in the quarter and increase at 62% in last 12 months. And this growth and clientele was right in line with our clients for the business.

Moving to Page 41 in the top right, I would remind for those who have viewed our results that we record our 23% diluted stake in Wealthsimple at fair value through other comprehensive income. And this quarter, we did adjust our evaluation downwards by 20%.

This 20% reevaluation is consistent with the decline in evaluation multiples for publicly traded FinTech providers. In the table at the bottom, I’d remind you of the upcoming purchase of an additional 13.9% stake in China asset management from our parent company for 1.15 billion.

And you can see along with that transaction, we are selling a part of our Great-West Lifeco state to them and this deal is on track to close likely in early Q3. I’d also highlight the right column that these strategic investments have a conservative value of $4.6 billion.

And lastly, on Page 42, you can see our typical disclosure around some of the parts of IGM. At the April 29 closing price at $40.71, we present here in implied PE multiple for IG Wealth and Mackenzie based upon expected 2022 earnings [indiscernible] and this implied multiple 6.1 times, which compares to PE multiples of global wealth managers and asset managers at much higher levels.

I’d also highlight the second column from the right unallocated capital and other, where you can see, we have excess capital of 805 million or around 230 million following the pro forma for the upcoming purchase of ChinaAMC’s shares. I do want to remark that we have a normal course issue with bit outstanding of 6 million shares as James was reviewed earlier.

And we believe this quarter actually produced very fundamental, strong results. And I just want to let everybody know we’re very excited to come in to Blackwood on Monday and have the opportunity to repurchase our shares what we believe is a very attractive price based upon where they’re trading.

That concludes my comments. I’ll turn over to questions.

Good afternoon. James, my first question with you, I mean, Luke kind of talked about it at the end on the share buybacks and coming out of the blackout period.

But just was wondering, like with the pullback in equity markets, kind of impacted how you think about capital allocation on the share buybacks. It sounds like you're going to be active, but has it had you thinking about being more active than usual on the share buyback as opposed to M&A?

And then similarly, on the M&A side, has the market decline impacted kind of the acquisition pipeline and asking prices?

Sure. Good afternoon, Geoff.

We are repurchasing approximately 30,000 shares a day as we speak, which does not sound like a lot. But it’s actually annualized that it’s 8% of our float if you exclude positions held by Power Corp and Great-West Life in IGM.

So I think there is very much an opportunity for us to increase that if weakness in markets persists. And so that is something we will be considering to be sure.

On M&A, what I’d say is, I think I shared with you Geoff, a couple of months ago at a conference of yours that I had never seen a bigger gap or spread between public companies evaluations and private market valuations. And typically those gaps don’t persist at least they don’t persist at the levels I’ve been witnessing them.

And of course, public company valuations have only gone down from there. And so I think there remains a gap.

I’m still waiting to see evidence of on block or M&A values coming down a meaningfully. But I think that is a possibility.

I think it’s very much a possibility in these very volatile markets that we’re going to see more attractive M&A values. And if we do then I’d refer you to our two kind of strategic questions that we’ve laid out over the next three to five years, it’s our full potential and high net worth and ultra high net worth in Canada and how will we go about achieving it.

And secondly, in asset management, how do we position Mackenzie in what is truly a global industry? So I certainly think there’s some room for our NCIB to increase, as I say, at current levels, it’s going to mop up 8% of the float per year.

And I’m hopeful that we’re going to see on block values decline, and that might create an opportunity for us to do what I said, I think good management teams should do, which is be disciplined at the top of markets and be opportunistic at the bottom of markets.

Thanks for that. My second question was for Barry and also for Luke.

Barry, just with your upcoming retirement, when you kind of take a look back, I mean do you feel like you've accomplished everything you wanted to do when you joined IGM? Or are there some things that you still want to see done and maybe Luke can carry on that baton?

And then Luke, I don't know if it's still a bit early, but are there things that you'd like to do to sustain the momentum at Mackenzie?

Well, I guess, I’ll start, thanks, Geoff. That’s a very, very nice question.

Yes, I’m certainly in short feeling really good about where Mackenzie is right now and for Luke [ph] and really terrific Mackenzie leadership team to take baton and take the firm to new heights. I mentioned if you had a chance to listen into our Annual Shareholders Meeting earlier today, we worked hard collectively last six years to continue to push hard on the brand and the investments talent boy we brought in, so many new teams are across the spectrum, particularly in the areas of as you know, sustainability and alternatives which are fast growing.

And also these growth catalyst that we all lean in on the five of them that I mentioned earlier, they work really well in tandem with the current core. We would characterize the growth caps as the future core.

So they both work well together in terms of building really, really good portfolios, we think for advisors and investors. So I think, really it is a dynamic industry though, right?

So I have full confidence that Luke and the team as I did take it over from Jeff Carney as Jeff did that we pivot and adapt as the environment changes. But if you look at what we’ve got right now, Mackenzie, the breadth of the investment capabilities and the brand and the distribution prowess and the fact that we’ve got not just market share gains across the traditional asset classes, but participating in the fastest growing asset class in the world being private markets via Northleaf, and then participating in the – by far fastest growing asset management in retirement market in the world, in China, through ChinaAMC.

That’s a pretty good launch pad. I would say we all would like to do more during our tenure, but duty calls for me, for my family and other demands of my time.

So I’m feeling really good where we are today. Rest assured though, it’s a dynamic industry and Luke’s got a pretty dynamic vision himself.

So pass to Luke for a few comments. Thanks, Geoff.

Sure, great. Thanks, Barry.

Thanks a lot for the question, Geoff, I appreciate it. I’d just like to maybe use the question to celebrate Barry a little bit.

I’ve been referring to what I call Barry six and of the six things that Mackenzie did under Barry’s leadership and Barry six-year leadership. First, we tripled our AUM.

We doubled our earnings. We consistently grew market share in Canadian retail.

We diversified our distribution channels. We continually launched innovative products in the relevant categories, and we enhanced our advisor and employee engagement.

So those are Barry six. My mantra has been, and it’s going to continue to be that we want to do all of those things again, every single one of them over the next five or six years just like we did under Barry’s leadership.

And right now I’d say I’m very fortunate that we have this foundation and the right strategy that we believe we can accomplish each and every one of those six things as we look forward into the next five-year period. So, that’s what my story is really one about continuity and Mackenzie momentum, and really continue the legacy the Barry has been building for this room.

Great. Thank you.

Thanks a lot. Barry, maybe switching to Northleaf, which had a very positive quarter, mainly driven by the 1.1 billion in net inflows.

You kind of talked about the product launches or the impending product launches for private equity, infrastructure and private equity. Is there a target from a flow perspective that you can provide us that you see over the next 12, 18 months that visibility there within that complex?

Yes. So first of all, you can see the growth, no surprise that drove the growth trajectory of Northleaf since our investment and before our investment.

And clearly, those – vast majority continued to be in the institutional space because they had just such a strong offering across private credit and private equity infrastructure and with existing clients re-upping and then new clients coming in. And as you know, they’re marketing now institutionally outside of Canada into U.S.

and Europe and we’re helping on the China side. The retail democratization it really is just an incredible coiled spring.

It takes time as you’ve heard me before in terms of education and but we’re starting to see the flows, the private credit side, the industry took a little bit of a step back temporarily just because of a couple of industry debacles, I guess, but the quality of then the experience that we invested [ph] is so impressive. So the private credit is starting to take hold, infrastructure actually right now probably has even though it’s been available short a period of time has had more sales than private credit.

It’s just a terrific asset class, new to a lot of advisors and as you know it gives you good long-term returns, income inflationary, sensitive as well. And then the private equity, as you’ve heard from me, that’ll be coming at this quarter actually Q2.

So I think it’s been a good year start of getting all the products ready to launch great partnership, Northleaf, the pedigree is just well received by the advisors taken as our time to educate advisors, sell it. Here’s how it improves a portfolio.

So we’re feeling pretty good. We didn’t – we don’t really have a target to be honest with you because we want to a take a year or two to get all the products launched again.

At the end of this quarter, we’ll have all the products launched in terms of their traditional three offerings at Northleaf, but more to come by the way in some other really needs to innovative products under Luke’s leadership. And as I mentioned, I think what you’ll see now is starting to see after it’s been a year now of good groundwork, foundational work, you’ll start to see the acceleration of the sales, particularly now that our wholesalers at Mackenzie and partnership Northleaf can go out with all three of private equity, private credit infrastructure, and have that solution type discussion with advisors to see where they want to add.

And they may already have exposure in some areas and therefore we can complement it with other areas. So not a specific answer to your question, it was a great question.

I think that we’ll probably give you more guidance look will probably be coming quarters and some targets. We wanted to get this thing all get out there and it’ll be totally up there now at the end of this quarter.

And you’ll start to see some good flows and it’s good. It’s good for advisors and Canadians, because it’s been so good for pension plans for so many years around the world.

Great. And speaking of institutional Barry you called Q1 net inflows of 880 million, which is probably one of the strongest quarters I’ve seen.

And certainly there’s been headwinds in the space for all asset managers. So maybe you can describe was it one large mandate?

Was it China? How did that come together and what’s the pipeline on that side?

Yes. Oh please.

Yes. As you know, I’m an old institutional guy years ago.

So as always one of my favorite topics. So first of all, just answer your question specifically.

The Wealthsimple partnership, it continues to really expand. And so they represent the majority of the institutional flows for us, we classify them as institutional.

We work with them as an institutional investor because we work with their CIO and their team. So, majority of that was from Wealthsimple and our Wealthsimple, the monies that we manage for Wealthsimple are they investing in our ETFs now, which they are now doing.

And the four ETFs that we’ve manufactured for them, we’re approaching $2 billion in AUM for Wealthsimple and they’re growing very fast, comes in every day, which is very nice. On the pure institutional side, pension plans down foundations sovereign wealth funds.

I would say I’ve never been more excited at Mackenzie in terms of our pipeline going forward. Now, let me conditionalize that a little bit.

The – my experience institutional as a money manager, 20-year institutional mandates, is that you have to have continuous opportunities and inflows, because you’re going to naturally lose some mandate through rebalancing by the plan sponsor. Like we lost one couple quarters ago because the pension plan was de-risking, doing lot in the LDI investing and we had equity.

So they liked our performance, but they – so we always going to have that natural term of institutional. And when the COVID hit, we actually – we compared relationships with the retail advisors almost the same virtually, not true for the institutional consultants, they were more challenging.

You probably heard from the industry of having that communication probably almost a year or so during COVID and they had their own not to be critical. Just saying, we noticed we couldn't get access to them like we would normally do because of that, that kind of natural pipeline started to pull back a bit for year to 18 months.

And therefore you’ve been seeing some net outflows institutional for Mackenzie that will stop going forward. The pipeline is very strong.

We might have a big win this quarter, Q2, if not will be early Q3. And then you’ll see it come through again.

So it’s been a several quarters you’ve seen of outflows except for obviously Q1 where the Wealthsimple was a nice, nice pickup and that continues. But I expect that you’ll see some really [indiscernible] but some nice lumpy winds coming in on a regular basis going forward.

The pipeline has been refreshed. It’s global, it’s around the world.

A lot of our quant team, trick quant team in Boston. A lot of it is Greenchip, the sustainable environmental fund, which now is of high interest as you know, not just retail, but now institutional for obvious reasons.

So it’s exciting, but we did have to take time to, I would say restock the pipeline and we’ve done that now. And so things should be quite positive going forward.

That’s very helpful. Thanks, Barry and congratulations again.

Lastly, James, you’ve kind of talked about the M&A strategy for the last several quarters, high net worth ultra high net worth. You kind of talked about your leverage and kind of potentially access capital moving up that leverage to two times plus.

So when we kind of think of this strategy, are you looking to like buy several like family offices or investment counselors and consolidated and how do you think about that? Or how should we think about that in terms of strategy within IG or Mackenzie or both?

Yes, good question. Our first priority to be sure is organic growth in IG Wealth and IPC.

And we continue to invest in those business, not just in terms of technology and process, but more importantly in terms of recruiting and bringing advisors to the organization and associated assets as well. And that’s very true at IG Wealth and it’s very true at IPC.

And so, we have a very positive view of the future of both IG Wealth and IPC and each of them as we speak are penetrating the high net worth channel and they will forever have our full support in doing so. Having said that, we do think there might very well be acquisition opportunities out there.

And I think it will come as no surprise to you to hear that the Canadian market is a mature market. It’s a market that where acquisition opportunities are relatively scarce.

And so, there’s not going to be a lot of properties out there. And so I think we’re going to have to be nimble and we’re going to have to be open minded, it could be a chunky acquisition.

It could be a fewer more smaller acquisition. So look, I’m approaching this very, very much with an open mind.

And as I said in an earlier question, we have been in the traffic and as I said, I have found as the gap between public market values and private market values to be quite wide. One of the widest I’ve seen in my career.

And if unblock values or M&A values come down, I – we will view that as an opportunity, but look, this is one where we’re going to have to be patient because it’s Canada and there’s not a lot left to buy.

Okay. Thank you for that, James,

Good afternoon and thank you. If I could just start off with ChinaAMC, I had a couple of questions over there.

One, could you speak to the timing of the private pension program in China for the pilot, and if you have more insights, when could we potentially accept a full rollout of the program?

It’s Barry. Thank you.

I’ll start. And Luke might have some comments as well.

We expect that as normally conducted with these big policy decisions in China, they’re going to do a pilot project for 12 months. And so that’ll be rolled out in some major urban centers in China and test the interest in, pick up and technology and the offerings, et cetera.

So this is a – so I would, what you’ll see probably after a year, then it’ll be expected if things as expected in terms of the pilot, it’ll be in full execution mode. The reason we find this so exciting for ChinaAMC, and we already mentioned it is the fact that we have been waiting for this third pillar for quite some time, we knew it was going to happen and now is here.

And this is a significant opportunity. It will take time, think about our RSPs decades ago.

It takes time for everyone to be familiar with tax deferred vehicle and how to use it. But you could support, you could argue that it would be, the pickups going to be quicker in China than in Canada because the Chinese government’s going to be fully behind it.

They are incented obviously with the three pillars now to get their aging demographics, taking care of during retirement. And the fact that the average age of the Chinese versus when we had RSPs rolled out in Canada, I mean, it’s a vastly different rate.

So 12 months of a pilot get things working, ChinaAMC by the way, already launched a couple years ago a full array of target date and target risk products just to get them ready, their design and their offering through institutional retail, because that has been potentially, could be some of the preferred investment strategies for this third pillar. So more on it than future calls and obviously we’ll keep you apprised and Luke and James and everybody else as what we hear on the ground on the pickup and future projections.

But that’s the official a 12-month rollout that will occur. And then we’ll give you update thereafter.

Okay. Makes sense.

And just my second question on ChinaAMC, the earnings this quarter. So excluding the seed capital losses of 15.8 million, looks like versus 21 [ph] million you quoted last quarter looks like a more sizeable drop in the mutual fund AUM number.

Just wondering, was there anything one time in nature over there and I guess how much operating leverage would the business have to hire AUM levels from this point on?

Yes, I’ll take that one. There do tend to be some seasonal fees within the fourth quarter, but substantially you should look at this as being in line with the long-term fund assets that that’s the biggest driver.

And so as total assets includes things like money market fund and institutional their lower fee, the biggest driver of the earnings is the long-term funds. And so when you look at 25% year-over-year on earnings compared to 22% year-over-year on long-term funds, that’s kind of the relationship you should expect.

Got you. That makes sense.

And just my last question on Greenchip’s fund performance was really strong over there. Flows were noticeably lower this quarter.

Just wondering, is this a reflection of more competition in the sustainable fund category or is this more of an industry-wide trend that happened in Q1?

The – thank you. The sustainable flows in Canadian retail continue to be very strong year-over-year.

Obviously, the flows are down overall this year versus last year, the industry level. So relatively speaking the interest remains relatively high.

The – if you look at our Greenchip environmental fund, you’re right five star, 99%, 99%, top performance inception. It’s just exceptional strategy, exceptional team.

And interesting enough, they deploy a value approach even though it’s a growth industry. So that’s probably another high interest of advisors.

So [indiscernible] is down year-over-year simply because it was new last year, right, brand new last year. We saw other mutual funds across the industry that were kind of brand new and novel, get exceptional flows.

We certainly got exceptional flows last year, this year. Right now, overall it starts still a number one seller, net sales into the Greenchip environmental mutual funds.

So selling very well for us right now. And we would say that there’s more competition.

Greenchip has been doing this for over 15 years. That’s all they do environmental investing globally.

So they have a significant competitive advantage over any new launches that have occurred. And the advisors recognize that and they’re capturing a large market share in that thematic environmental area.

There’s been a broadening of ESG offerings and broader sustainable investing offerings across Canada, but that environmental thematic area, which is a real catalyst probably for years to come, Greenchip is dominating it. So we’re very, very pleased with that.

And I think you should expect more flows. And by the way, it’s not just from a sort of a offering to clients because of their ESG interests is just a very, also very powerful investment thesis to invest in publicly traded global companies that are principally focused on in the areas of new energy sources.

And so, if I could put a little plug in also, we have a very strong resources team of the current energy sources. So interest in both are occurring because the transition as we know is going to take time.

And so, and as I know, a lot of the new energy sources are powered by the current energy sources. So you know all that.

So we’re quite blessed to have both actually, but specifically the decline in the Greenchip year-over-year, I would no worries at all that was expected because it’s newness last year and it’s just powering ahead and it will for quarters to come.

Yes, I appreciate the color. Those are all my questions.

Congrats again on your time, Barry. Thank you.

Yes. Two questions.

First one on the seed capital losses given still some market erosion here into the second quarter. Is the likelihood that we should expect to see some more unrealized losses going through in Q2?

Or what's – how should we look at that going forward?

Yes, you definitely should, Jamie. We’ve got about $130 million of seed capital at IGM and you can expect it’s substantively largely equities also.

We do have some infrastructure private credit, but you should expect to see the seed capital move with markets as it did in Q1. And I’d say the same for ChinaAMC, a large part of the seed capital is our proportionate share of their reductions.

So as markets move, you can expect those type of mark to markets every quarter.

Okay. Good to clarify.

And then the second one, more strategic in nature around the Primerica relationship, probably still early days here, but wondering if there's anything that you can highlight as you're building out that exclusive relationship?

Sure. It’s Barry.

Again as we expressed last quarter, I really excited by that and still work in progress and getting everything set up in terms of the new funds and the systems and the plumbing and the marketing materials and the rollout. And – but we’ll give you more information on that probably next quarter, but it’ll – things are progressing really well.

We’re excited by, Primerica is growing very nicely too. So – and we already – Mackenzie have about $1 billion around, they use about $1 billion of our mutual funds already.

So we know them well. And so to be added on, as one of two managers – AGF would be the second manager for this new program with the way that they’re growing is really exciting.

So early days we’ll give you more updates on that, but things are progressing well in terms of the getting everything in place for the launch. Thank you.

Thank you.

Thank you. And thank you for everyone joining us on this Friday afternoon.

Hope you have a great weekend. And with that, we will end today’s call.