IGM Financial Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 7 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Second Quarter 20 24 Analyst Call and Webcast. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask I would now like to turn the conference over to Kyle Martin, Treasurer and Head of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Betsy, and good morning, everyone. Welcome to our second quarter 2024 earnings call. Joining me today on the call, we have James O'Sullivan, President and CEO of IGM Financial Damon Murchison, President and CEO of IG Wealth Management Luke Gould, President and CEO of Mackenzie Investments and Keith Potter, Executive Vice President and CFO of IGM Financial. Before we get started, I would like to draw your attention to our caution concerning forward looking statements on Slide 3 of the presentation. Slides 45 summarize non IFRS financial measures and other financial measures used in the material.

Speaker 1

And on Slide 6, we provide a list of documents that are available on our website related to IGM Financial's 2nd quarter results. I'll turn it over to James.

Speaker 2

Okay. Thank you, Kyle, and good morning, everyone, and thank you for joining us today as we discuss IGM Financial's 2nd quarter results, which demonstrate how our businesses are successfully executing against their growth strategies. Turning to Slide 8, adjusted EPS was $0.93 during the quarter, up 4.5% year over year. Our earnings were supported by strong growth in our AU M and A across our core operating companies and strategic investments, up almost 15% relative to last year. IGM's Q2 ending AU M and A, which represents our core companies, is also our highest on record.

Speaker 2

We're seeing positive signs and indicators in each of our businesses. In Wealth Management, IG Wealth has been very successful in the mass affluent and high net worth segments, and we've seen this success accelerate further in recent months quarters. Rockefeller Capital Management's growth in the high net worth and ultra high net worth segment of the U. S. Wealth market continues to impress, driven by a combination of strong organic growth from their existing advisors and their ability to attract top financial advisors to Rockefeller's leading platform.

Speaker 2

WealthSimple's proven ability to deliver for Canadians continues to drive impressive new client acquisition and expansion of share of wallet within their existing clientele. Within asset management, Mackenzie's gross sales have rebounded impressively relative to both 20222023. Their ability to bring relevant investment management solutions to independent financial advisors and wealth management partners, such as PFSL and WealthSimple is driving this growth. China AMC, the 2nd largest asset manager in China, continues to take advantage of their leading competitive positioning to drive AUM growth across product and distribution categories. And Northleaf achieved higher fundraising results this quarter than any period we've recorded to date.

Speaker 2

The team is leveraging their global private market investment solutions across private equity, infrastructure and private credit to drive continued growth. In the context of these strong results, we continue to invest to drive growth, while also returning capital to shareholders through our attractive dividend and opportunistic share buybacks, which we maintained through July and into August. We are reiterating our 4% expense growth guidance for full year 2024, which includes just under 3% growth in the first half of the year and slightly higher growth in the second half of the year due to seasonality differences. Turning to the current operating environment for our businesses, starting with recent financial market conditions on Slide 9. Equity markets generally continued to rise during the second quarter and into the month of July.

Speaker 2

However, recent volatility has partially offset gains from the 1st 7 months of the year. On Slide 10, we present the Canadian fund industry. The Canadian mutual fund industry remained in net redemptions during Q2, but we are seeing year over year improvements in net sales across a number of product categories. This is encouraging. While the Bank of Canada decision in June July to begin lowering its overnight rate is constructive for medium term industry flow outlook, the effect of interest rates normalizing will, all else being equal, improve the industry environment over a period of quarters, not months.

Speaker 2

We anticipate industry net redemptions will continue into the second half of the year, with a gradual improvement as we move forward to 2025. Slide 11 outlines IGM's consolidated AU M and A, which reached a record high at the end of Q2 and began in July. On the right is our 2nd quarter earnings, which I spoke to on a previous slide. Slide 12 contains our earnings contributions by segment. Keith will speak to this in more detail later in the call.

Speaker 2

On Slide 13, we present ending AUM and A by business. My earlier comments highlighted the key drivers that are contributing to the solid 15% year over year growth, including our strategic investments. With that, I will turn the call over to Damon, who will speak to the performance in our Wealth Management segment.

Speaker 3

Thank you, James, and good morning, everyone. Turn to Slide 15 and Wealth Management second quarter highlights, including IG Wealth, Rockefeller and WealthSimple. IG Wealth ended the quarter with AUA of $130,000,000,000 up a solid 11% year over year and 1.3% during the Q2 driven by financial markets. Gross inflows of $3,600,000,000 represented our best second quarter in gross inflows on record. Net outflows were $173,000,000 during the quarter.

Speaker 3

As released earlier this week, flows during July were very strong. It was our best July on record for gross inflows with net sales into IGM product of $271,000,000 and net inflows of $262,000,000 Total gross inflows from newly acquired clients of $1,200,000,000 represented the best quarter in our history. As highlighted on this slide, we continue to see an increasing proportion of new client inflows from both the mass affluent and high net worth segments. We are proud of these results and we're encouraged by the signs of improving sentiment. I'll reinforce what James just spoke to.

Speaker 3

We view these improvements continuing to unfold over quarters not months. As our advisors work with their clients to navigate the shifting environment, we will continue to look for and capitalize on additional positive trends as they emerge. Similar to last quarter, our insurance business continues to deliver strong results, while we saw strong volumes within our mortgage business despite competitive environment. We look forward to continuing these positive momentum as we develop leverage and benefit from the partnerships we've established in both of these businesses. Both Rockefeller and WellSimple once again had very strong quarters, which I'll speak to on the coming slides.

Speaker 3

Turning to Slide 16, you can see IG's Q2 flows. As you can see on the left hand side, July has traditionally been a relatively strong month for us. This July was no different and was our best July on record for gross inflows. We believe a contributing factor to our July results was the opportunity presented by the changes to Canada's capital gains rate policy. These changes drove opportunity for additional conversations, engagement with our clients and prospects alike, allowing us to both reinforce our financial planning expertise and discuss the benefits presented by our investment shelf.

Speaker 3

Our gross inflows continue to be very strong with Q2 representing our best second quarter on record. Our year to date gross inflows are also tracking well. On the right hand side, you can see a clear positive turn in our total net flows and IGM product net sales. There's a little bit of noise in IGM product net flows and client cash during June relating to the country's capital gain policy change, which reversed in July as I just spoke to. As we look for positive sentiment to fully return, our advice is to continue to work with our clients to save and build wealth.

Speaker 3

Turning to Slide 17. Near the top left, you can see the strength of our gross inflows, which were 28% higher than Q2 of last year. Our growth outflow rate remains elevated versus last year and redemptions continued predominantly to be partial in nature.

Speaker 2

At the bottom right, you

Speaker 3

can see our last 12 months trailing net flows rate, which is now showing a clear indication of a bottom and a turn back to positive. Turning to Slide 18. As mentioned, the $1,200,000,000 of gross inflows from newly acquired clients during the 2nd quarter represented our best quarter on record for new client acquisition. During the Q2, gross inflows from massive fluid and high net worth clients represented over 75% of gross flows from newly acquired clients with $1,000,000 plus clients accounting for 32%. We have a track record for executing on growth within our target markets And as we move forward, we fully expect to see further progress as Canadians continue to seek financial planning advice.

Speaker 3

Turning to Slide 19. This shows the productivity of our advisors. As we drive growth in the master fluid and hybrid segments, the increases in productivity that we continue to show are testament to where we have invested. We expect to see a continuation of this trend. Turning to Slide 20, an update on our focus of building our business to capitalize on industry wealth drivers.

Speaker 3

During the quarter, we entered into a number of partnerships which support our capability and will assist us in capitalizing on the industry wealth drivers. These partnerships include better equipping our advisors with tools needed for tax planning conversations. This also parallels well with our insurance partnership with life design analysis, which we highlighted last quarter. A partnership with a major healthcare provider that will allow our high net worth clients to access additional healthcare assessments and diagnostics at reduced rates. And enhanced technology to provide our small and medium sized business owners with the tools needed to value their companies, a crucial step as they look to either grow or monetize their business.

Speaker 3

Our ongoing focus on the industry wealth drivers will allow us to continue to grow in key client segments and drive increased productivity of our advisors. Now let's turn to Slide 21 and talk about Rockefeller's progress. Over the last 12 months, organic growth was driven has driven $4,900,000,000 in client assets. Rockefeller continues to add to their private advisory network having added 57 new advisors over the last 12 months. Now turning to Slide 22.

Speaker 3

Let's talk about WealthSimple. Wealthsimple continue to reinforce their position as an important and growing player in the Canadian Wealth Management ecosystem. Wealthsimple ended Q2 with over $43,000,000,000 in AUA increasing 13% during the quarter and 87% over on a year over year basis. Client count also expanded by 15% year over year to 2,500,000 clients. With that, I'll turn the call over to Luke Gould.

Speaker 4

Thanks, Damon. Good morning, everyone. So turning to Page 24, a few comments on the quarter. Similar to Q1, this continue to be a very good quarter for clients and shareholders with AUM up 4.5% and average client account value is up over 10% in the last 12 months. Higher asset levels and operating leverage led to our earnings Mackenzie being up 12% in the quarter and the highest Q2 in 15 years.

Speaker 4

On 0.2, investment funds experienced net redemptions of $745,000,000 during the quarter and this is in the context of continued net redemptions in the industry. We saw slight year over year improvements for industry long term fund flows in Q2 as reviewed by James and Damon and this trends continued into July and we at Mackenzie had gross sales up 38% and noticeable net sales improvement. In point 3, the share of our assets in 4 and 5 star funds remained relatively unchanged quarter over quarter at 52% and during the quarter we had a number of product launches. We launched a suite of low vol ETFs with our global quant equity boutique that brings their impressive track records in this space to retail as well as an emerging markets ex China equity fund with this boutique. It's early days, but we're seeing very good momentum within retail with this global quant equity team and we'll be focusing on these newly launched products as well as the Global Equity EM and PE replication offerings managed by this team in the back half of the year.

Speaker 4

Also launched an ETF version of our flagship global dividend fund and you can expect it to bring more active equity mandates to ETF structure in the future for those advisors who like the characteristics of ETFs. We also launched a global corporate fixed income fund that fills a gap that we had in our shelf relative to some of the important flagships of our competitors in the market. Both China MC on the right and Northleaf delivered strong results as reviewed by James. China MC had another strong quarter of net flows with KRW41 billion or KRW8 billion in long term fund net sales in the quarter and their AUM grew by 25% during the last year as a result of these strong net sales. And Northleaf delivered CAD1.8 billion of new commitments during the quarter, which was our highest quarter for new commitments since we made our investment and was spread across private equity, private credit and infrastructure.

Speaker 4

Turning to Page 25, you can see the trended history of Mackenzie's net flows. On the right, you can see that last 12 month trailing net flows were relatively stable in the quarter. We had some net sales softness in some of our larger flagship mandates who have weaker short term performance, but have adhered to their discipline. This is being offset by improvements elsewhere that I'll review on coming slides. I'd also highlight the top left, the improvement in gross and net sales in July with gross sales up 30% and net redemptions improved to $73,000,000 from $224,000,000 to prior year.

Speaker 4

We're encouraged by these signs of improvement in the industry and as we move through the back half of twenty twenty four, we feel we're well positioned with compelling performance across multiple relevant mandates. Turning to page 26, the only remark when it makes to the top right, you can see our Morningstar rankings remain relatively in line with last quarter and the industry. On performance, I'd highlight that the broadening of market movements in July August has been very favorable to many of our boutiques and we're expecting higher Morningstar and Percentile rankings as we continue into Q3. Turning to page 27, you can see our performance in net sales for our retail mutual funds and ETFs by boutique. In the middle, I'd highlight that our growth Bluewater and Green Ship boutiques have remained true to their respective disciplines, but this has kept them out of some of the narrow places that have performed well recently.

Speaker 4

You can see the year over year net sales declines here and I'd also comment that gross sales have remained very resilient with these boutiques. I'd also highlight the performance strength and the emerging sales momentum in some very large categories with our global equity team sorry, our global quant equity team, our global equity and income team as well as put them advised U. S. All cap growth mandate which is located in the right column. Also as mentioned earlier, it's remarkable how interesting how much things can change in 5 weeks and we see meaningful performance improvements in some of our boutiques for example in Ivy, most mandates now sit top quartile across time horizons as we've moved through July August.

Speaker 4

Turning to Page 28, you can see the continued strength of both AUM growth and net flows in the Chinese investment fund industry. On the left hand side, the Q2 once again had very strong flows with Q2 net sales of KRW 1.8 trillion or approximately KRW340 billion. Long term fund net sales made up the majority sorry, long term fund net sales was the majority of Q2 sales as opposed to money market fund and this is driven by significant sales into fixed income funds. Industry long term fund AUM grew by 7% in the quarter and is up 10% year over year. And importantly on the right, you can see China MC's continued strong market position ranking number 2 in both long term funds and overall with a meaningful increase in market share from 4.8% to 5.4% as their assets grew by 24% in the last 12 months versus the industry growth of 10%.

Speaker 4

I should also highlight that Chinese New Year was the net sales leader over the last 12 months with $282,000,000,000 or $50,000,000,000 over the period. On page 29, you can see the continued growth in China Sea's AUM with investment fund AUM up 3% during the quarter and 25% over the year driven by growth in both long term and money market funds. And as mentioned these increases were driven substantially by net sales which you can see in the chart at the bottom. And lastly on Page 30 you can see another quarter of continued strong growth at Northleaf with $1,800,000,000 in new commitments and $4,600,000,000 over the last 12 months. Northleaf has consistently put on about a $1,000,000,000 new commitments each quarter since we formed our partnership with them in 2000 and this $1,800,000,000 was the strongest quarter yet.

Speaker 4

The fund rate near the quarter was well diversified across Canadian and international clients and as mentioned was a good mix of private equity, private credit and infrastructure mandates. And I'll turn the call over to Keith Fodder.

Speaker 1

Thank you, Luke, and good morning, everyone. On Slide 32, you can see key highlights for Q2. Adjusted EPS was $0.93 excluding other items at Lifeco and one time debt refinancing charges at Rockefeller. Adjusted earnings were 4.5% year over year, our 2nd highest Q2 on record. We returned $171,000,000 to shareholders in the quarter through quarterly dividend and continue to be active in our NCIB program, repurchasing $37,000,000 in shares.

Speaker 1

As Damon spoke to already, WealthSimple continued to execute on its strategy and driven by continued exceptional performance, we have once again marked up the fair value of our investment from $722,000,000 to $835,000,000 which is fair value to other comprehensive income. And finally on China MC, we had another strong quarter with earnings surpassing levels that were last experienced prior to fee reductions announced in July of 2023. Turning to Slide 33, you can see our AUM and A and flows and coming off a strong Q1 ending AUM and A was relatively unchanged up 0.1% while average assets increased 2.4%. Turning to Slide 34, we have our consolidated earnings at IGM. Growth in average AUM and A supported higher revenues in both our Wealth and Asset Management segments.

Speaker 1

And on point 2, as James highlighted earlier in the call, our operations and support and business development expenses were up 4.9% on a year over year basis and 2.7% year to date and on a full year basis we are maintaining our guidance of 4% growth over 2023. On Slide 35, we present the key profitability drivers for IG Wealth. And I'll highlight a few points here. First on the far left, you can see average assets were up 3.4% in the quarter. And on the right, our advisory fee rate reflects the strong quarterly increase in AUA and clients moving up wealth bands, including our continued success with the acquisition of Mass Affluent and High Network clients.

Speaker 1

The rate is also impacted by a rotation of client cash balances and other solutions, including increases in other cash like products such as GICs and Hesus. The stable product mix and continued success in the Asset Flow and High Network segment, we expect a decrease of closer to 0.5 basis points per quarter in this rate. And finally, you can also see product fees and asset based compensation rates were stable for the quarter. On Slide 36, IG's overall earnings were $111,700,000 in Q2. On point 1, advisory and product and program fees are up year over year and relative to last quarter.

Speaker 1

And on point 2, year over year planning revenues are in line with 2023 and another strong quarter for insurance results were offset by lower mortgage income. As Damon commented, we saw strong mortgage volumes within a competitive environment, which is great.

Speaker 3

Our lower mortgage income was driven

Speaker 1

by negative fair value adjustments, which are primarily accounting related volatility versus economic in nature. The insurance business had another very strong quarter relative to a year ago and posts similar results as the Q1. Looking forward, we expect to continue to see year over year growth in the business. And as a reminder, other product commissions will move in a similar direction as revenue, which you can see in the table including a 0.2 and has been at 63% of revenue for the last two quarters. Moving to Slide 37, we have Mackenzie's AUM by client and product type as well as net revenue rates.

Speaker 1

On the left, you can see average AUM is up 1.4 percent. And on the right, the overall 3rd party rate was unchanged in the quarter at 53 basis points. And the top line where it represents a smaller AUM base excluding Canada Life is driven by continued strength with our PFSL and WealthSimple Wealth Management partnerships. Turning to Slide 38, you can see Mackenzie's earnings of $55,900,000 is up 11.6% year over year. With higher AUM, net asset management fees are up year over year and sequentially and net investment income is reflective of positive market growth in the quarter.

Speaker 1

Slide 39 has Chinese New Year results. Two quick points. First off the left, AUM continues to increase with ending AUM of RMB2.2 trillion, up 20 percent year over year, including RMB65 1,000,000,000 in Q2 total net flows. And on the right hand side, we have quarterly earnings in Q2 now exceeding earnings prior to the fee rate reductions from Q3 of 2023. Slide 40 has earnings contributions from companies in each segment.

Speaker 1

I have a couple of comments on Rockefeller. Adjusted earnings improved in Q1, driven by revenue growth as they build out their global family office business. And as mentioned, Rockefeller has refinanced debt this quarter on a more favorable terms, which is reflective of the progress being made and the $3,300,000 adjustment to earnings is reflective of a one time prepayment and refinancing fees. Slide 41 provides a summary view of earnings and ownership and the value of our strategic investments by segment. Our main comment is on WealthSimple.

Speaker 1

And once again, we have increased the fair value to $835,000,000 It's reflective of their exceptional performance during Q2, public peer valuations and also revised revenue expectations for the company. And from IGM's valuation perspective, our strategic investments now represent $5,300,000,000 in value. As a reminder, WealthSimple is fair value for OCI. Rockefeller currently does not contribute in a meaningful way to earnings, but both have significant value. Slide 42 highlights execution against our capital allocation priorities.

Speaker 1

As James said at the beginning of the call, we are investing to drive growth while also returning capital to shareholders. And we continue to execute on share repurchases while maintaining financial flexibility with gross debt to EBITDA ratio of 1.6 times and unallocated capital of $379,000,000

Speaker 2

As we move into

Speaker 1

the back half of the year, we will continue to execute on our NCIB while focusing on our growth oriented business priorities. Before I turn over the call to the operator, on behalf of IGM, we would like to acknowledge that this will be Geoff Kwan's last call covering IGM. I'd like to thank him for his 17 years of coverage and the professionalism that he's brought to the business day in, day out, and we wish him all the best in his future endeavors. And that concludes my remarks. I'll turn over the call for questions.

Operator

We will now begin the question and answer The first question today comes from Jeffrey Kwan with RBC Centimeters. Please go ahead.

Speaker 5

Great. Thanks. And Keith, thanks for the kind words. I don't know if I deserve it, but thank you very much for it. My first question for you is just how you're thinking about capital allocation given, I guess, the pause on M and A, the free cash flow generation of the business, and how you think about buybacks because obviously you've been doing some share buybacks lately, the deleveraging as well as the organic growth initiatives that you've got in place?

Speaker 2

Yes. Thanks, Jeff. And again, congratulations to you. We stated at Investor Day that we feel we were and are done with M and A at least for a period of time. And by that, I mean kind of chunky M and A, M and A of any kind of moderate to large size.

Speaker 2

There's always very small stuff to be done. And I think we're in that period now. I mean, as I said at Investor Day, it might be a 2 or 3 year period where you should expect us to be focused internally. You should expect us to be focused on our core businesses and on strengthening those businesses. And that's very much what we're doing.

Speaker 2

So the first use of free cash flow very clearly is a dividend. We remain as committed as ever to that. We have started a buyback and I believe this quarter we repurchased about $37,000,000 worth of shares. I think that's a reasonable run rate. I think you should expect that to continue.

Speaker 2

I mean, we would buy more at lower levels and less at higher levels. But it's not a bad estimate, I would say. And so with the free cash flow that we have, what doesn't go to the dividend, what doesn't go to the buyback, we continue to invest in projects across IGM, IG and Mackenzie. So that's how we're seeing. I would not expect any chunky M and A here, although as I've said just to cover myself, if the phone rings, we'll answer it.

Speaker 2

But we're really happy with the architecture that we have with 2 divisions, 3 wealth management companies, 3 asset management companies. We think it's a great lineup. We're investing in it and we believe it will generate higher growth and ultimately higher dividends over time.

Speaker 4

Thanks for that James.

Speaker 5

I guess maybe that was a little bit my follow on question is the kind of the 2 year 3 years that you talked about at Investor Day. Is that guided to a certain extent on where leverage is and you want to get to a certain level before you consider it? Is it driven by the activity that you've done in the past while and just want to kind of focus and execute on those? And similarly, when you do get to that time, you're perhaps ready to do a transaction if it's available. Is there, all else equal, something that interests you the most?

Speaker 5

Like is it making a bigger stake in Rockefeller? Is it acquiring an asset management as a capability to the shelf or something else?

Speaker 2

Sure. Well, it's not driven by leverage. Our leverage ratio as we disclosed this quarter is about 1.6 times. So we leverage is not it at all. I think leverage is not it at all.

Speaker 2

I'd say it's driven by 2 things. 1 is following a period where we did a fair bit of M and A. Obviously, China AMC and Rockefeller and ITC and there were others too. There is a bit of a desire to just kind of hunker down and focus on our great core businesses being IG and Mackenzie and use our capital and not just our capital, our human resource talent, our time and attention to make those businesses as strong as they can possibly be and what we know are very competitive and fast moving markets. So one was really kind of a desire to put our head down and focus on our core businesses for a period.

Speaker 2

The second thing I would say, Jeff, is that we're also kind of looking out and we're saying when might, I guess I said, we love the architecture, 2 divisions, 3 businesses in each division. When might opportunity next present itself in respect of things we currently own sum up? And all of that kind of aligns with the 2 or 3 year window that I talked about. And so there will be an opportunity to do more at Norfleet. There will, I expect, in the fullness of time, be an opportunity to do more with Rockefeller.

Speaker 2

And we'll see how the others we'll see what happens to others including, for example, Wealthsimple. So I would it was not leverage. It was a desire really to focus on spend a period of time focused on our 2 big core businesses. And then we looked out over the horizon and we said the next batch of opportunities in terms of what we currently own is likely to be a couple or a few years out. And so that's really all it is.

Speaker 5

Okay. That's helpful. And if I can maybe sneak in one last question for Luke and Damon. It sounds like the message was July, the stronger net sales performance may have been a bit seasonality, a bit driven by the capital gains tax changes. But bigger picture, the industry net redemptions are hopefully going to improve as we exit 2024 albeit maybe gradually.

Speaker 5

Is that correct? And then also the other part of my question is on the gross sales that did come in for July or even June, like are you seeing any changes in the types of funds clients are putting money into versus what you might have seen over the past 1 to 2 years?

Speaker 3

Thanks, Jeff, and congratulations again. In terms of the first part of your question, I would characterize July and the flows in July, there are 3 primary drivers there. 1 would be, as you mentioned, the capital gains and working with our clients and allowing them to crystallize some gains and take advantage of the lower inclusion rate. That drove money into cash. A lot of it was invested in June, but some of it remained in July.

Speaker 3

We were able to reinvest in July. But the good thing about that as well is that we were able to work with our clients and with prospects who weren't clients yet to do the same thing for the money they had at other dealers and crystallize some gains. And we were able to bring that money over to IG in July. That's the first thing. The second, I would say that the sentiment, it's slowly, but it is changing in this country.

Speaker 3

So there's a lot of money sitting in cash in this country, short term investments and at this firm and we're starting to see some money be invested, which is great to see. And the 3rd, which is the largest driver is that we've just done a fantastic job on new client acquisition. What you see right now a firm where our advisors are not just enabled, but they're motivated and squarely focused on working with Canadians that have financial challenges and need serious people to answer the questions that they have. And we've done a you could see the buildup and we've steadily been improving here. And I fully expect that to continue over time.

Speaker 3

In terms of the gross sales and what we see, we're a managed solution shop. So there hasn't been much change there in terms of what people are invested in. I mean, you see the performance of our shelf and it's been very, very strong. So our advisors are committed to making sure that our clients invested in the future as per their financial plan. So we haven't seen much change as it relates to gross sales.

Speaker 4

Yes, Jeff, it's Luke. I guess 2 things. 1, thanks again for your coverage. It's been great over a very, very long time as Keith said, and I'd echo his sentiments. On Page 10, you got to walk up for your run.

Speaker 4

It was encouraging to see year over year improvement in Q2. And as you know, that's something we haven't seen for a while. And I think Page 10 lays out what we saw in Q2 by product category. And what was noteworthy is the improvement that came in the foreign equity. So those global equity and U.

Speaker 4

S. Equity, we did see some noteworthy improvement in Q2. And then as mentioned, we got the Ipics preliminary numbers for July yesterday and it did show a meaningful year over year improvement. It was positive overall. And from the vantage point that we have, it wasn't those same product categories with good flows into income as well as good flows into global and U.

Speaker 4

S. Equity.

Speaker 5

Okay, perfect. Thanks everyone.

Operator

The next question comes from Jamie Gollin with NBF. Please go ahead.

Speaker 6

Yes, thanks. Actually just wanted to kind of follow on that last question. Just looking at Mackenzie's results and the net flows rate at Mackenzie. The industry had a little bit of a pickup here in the last few months, but it looks like Mackenzie is still somewhat stabilized at a slightly lower trend. So maybe talk through some of the drivers of that performance, given that some of the positive remarks you made about the underlying fund performance and success of

Speaker 1

the ratings?

Speaker 4

Yes, you got it, Jim. Good question. And back on Page 27, I'm going to refer some of my remarks there. We've got a few things going on. One is mentioned in some of our flagships, we've had high conviction, high discipline boutiques like Bluewater and Green Ship, which focuses on obviously somatic investing to combat climate change.

Speaker 4

What we've seen there is weaker short term performance as these boutiques have stuck their discipline. And you can see on this slide the year over year net sales decline and that's been a feature of our overall net sales. At the same time with our boutique approach, we obviously try and make sure that we can be a provider of choice and have something relevant and compelling in all environments for all client needs. And you can see that the declines in those boutiques is being offset by sales momentum in the Global Quant Equity boutique, the Global Equity and Income boutique. And again, I mentioned our U.

Speaker 4

S. All cap growth mandate advised by Putnam as well as some improvement in fixed income. And so I'd characterize that we're going really strong where we have such compelling performance in large categories like global equity and we're going to keep on leaning in there during the back half of the year. But that's what you see is some sales declines in some of our flagships that are being offset by momentum elsewhere.

Speaker 3

Okay. Understood.

Speaker 6

Over to the IG Wealth Management Business, you highlighted the decline in advisor fee rates. I appreciate that color. And just as we kind of look out over the next few years, I believe the commentary previously was that we would see about maybe like 50 basis points of decline on a sort of like a quarterly basis until and remind me what that sort of run rate would be. Can you just refresh that outlook and how you're seeing the shifting mix to high net worth clients and maybe some product mix and how that's going to play out over the next few quarters?

Speaker 1

Yes, sure. It's Keith here. Thanks, Jane. Yes, so the I did comment that if you just have product mix fairly stable as we move toward positive net flows and you just have the mix shift toward the mass affluent high net worth about 0.5 basis points per quarter would be pretty reasonable. And we would have been in that territory a little bit higher than that this quarter, but there was strong market returns.

Speaker 1

The other influencing factor would be we have internal cash where we're in a spread and then we don't charge advisory fees to speak of when we're into other short term cash like GICs or HESA. And that's what you saw this quarter that we wouldn't expect that to continue. There will be volatility. We suffered at that last quarter as well and prior quarters is fairly stable. But I would guide to 0.5 basis points subject to mix in product mix.

Speaker 6

And just following on that, do you have a view as to like the length of time that should persist? Like or is it just you have visibility over the next 4 to quarters, but beyond that, it's more challenging. What are some thoughts on that?

Speaker 1

Yes. I would say visibility over the next few quarters, Jaeme. And as we move longer term, we'll get we can provide more visibility at that point. But I'd keep it to the next couple of quarters to few quarters.

Speaker 3

Yes. Okay. Understood. Thanks very much.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Kyle Martins for any closing remarks.

Speaker 1

Thanks, Betsy. And once again, we'd like to thank everyone for joining the call this morning. And Betsy, with that, we can end today's conference call.

Operator

This brings an end to today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.

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Key Takeaways

  • Adjusted EPS rose 4.5% year-over-year to C$0.93, driven by record-high AUM/AUA across IGM’s core businesses.
  • Wealth Management delivered its best second quarter on record for gross inflows, with IG Wealth, Rockefeller and Wealthsimple all reporting double-digit AUA gains.
  • Asset Management saw a rebound in Mackenzie gross sales (up 38% in July), China AMC grew AUM by 25% year-over-year, and Northleaf achieved a quarterly fundraising record of C$1.8 billion.
  • IGM reiterated its 4% expense growth guidance for 2024 and returned C$171 million to shareholders in Q2 via dividends and C$37 million in share buybacks.
  • Canadian mutual funds remained in net redemptions in Q2 and industry outflows are expected to persist into H2, with only gradual improvement as interest rates normalize.
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Earnings Conference Call
IGM Financial Q2 2024
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