IGM Financial Q2 2024 Earnings Report

IGM Financial EPS Results

• Actual EPS: C$0.93
• Consensus EPS: C$0.95
• Beat/Miss: Missed by -C$0.02
• One Year Ago EPS: N/A

IGM Financial Revenue Results

• Actual Revenue: $816.31 million
• Expected Revenue: $826.00 million
• Beat/Miss: Missed by -$9.69 million
• YoY Revenue Growth: N/A

IGM Financial Announcement Details

• Quarter: Q2 2024
• Date: 8/7/2024
• Time: N/A
• Conference Call Date: Thursday, August 8, 2024
• Conference Call Time: 8:00AM ET

Mackenzie Investments ("Mackenzie") is a Canadian investment management firm with approximately $244 billion (CAD) in assets under management as of December 31, 2025. Mackenzie seeks to create a more invested world by delivering strong investment performance and offering innovative portfolio solutions and related services to more than one million retail and institutional clients through multiple distribution channels. Founded in 1967, it is a global asset manager with offices across Canada as well as in Beijing, Boston, Dublin, Hong Kong and London. Mackenzie is a member of IGM Financial (TSE:IGM) (TSX: IGM), part of the Power Corporation group of companies and one of Canada's leading diversified wealth and asset management organizations with approximately $310 billion (CAD) in total assets under management and advisement as of December 31, 2025.

IGM Financial Q2 2024 Earnings Call Transcript

Key Takeaways

• Adjusted EPS of $0.93 in Q2, up 4.5% year-over-year, backed by record-high AUM/A across IGM’s core businesses.
• Strong AUM growth across all segments: IG Wealth, Rockefeller, Wealthsimple, Mackenzie, China AMC and Northleaf drove overall AUM/A up nearly 15% year-over-year.
• The Canadian mutual fund industry stayed in net redemptions in Q2 despite year-over-year sales improvements, and industry outflows are forecast to continue into H2 2024.
• IGM reaffirmed its full-year 2024 expense growth guidance of 4%, with slightly higher spending expected in H2 due to seasonal factors.
• Capital return remains a priority: IGM paid $171 M in dividends, repurchased $37 M of shares, and increased the fair-value mark of its Wealthsimple investment to $835 M.

Presentation

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Second Quarter 2024 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 questions.

[Operator]

To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star, then zero. I would now like to turn the conference over to Kyle Martin, Treasurer and Head of Investor Relations. Please go ahead.

[Kyle Martens, Head of Investor Relations at IGM Financial Inc.]

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.

[Kyle Martens, Head of Investor Relations at IGM Financial Inc.]

Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on slide 3 of the presentation. Slides 4 and 5 summarize non-IFRS financial measures and other financial measures used in the material. On slide 6, we provide a list of documents that are available on our website related to IGM Financial's second quarter results. I'll turn it over to James.

[James O'Sullivan, CEO at IGM Financial Inc.]

Okay. Thank you, Kyle, and good morning, everyone. Thank you for joining us today as we discuss IGM Financial's second quarter results, which demonstrate how our businesses are successfully executing against their growth strategies. Turning to Slide 8, adjusted EPS was CAD 0.93 during the quarter, up 4.5% year-over-year.

[James O'Sullivan, CEO at IGM Financial Inc.]

Our earnings were supported by strong growth in our AUM and AUA across our core operating companies and strategic investments, up almost 15% relative to last year. IGM's Q2 ending AUM and AUA, which represents our core companies, is also our highest on record. 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 and quarters.

[James O'Sullivan, CEO at IGM Financial Inc.]

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. 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

Within asset management, Mackenzie's gross sales have rebounded impressively relative to both 2022 and 2023. 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. ChinaAMC, the second-largest asset manager in China, continues to take advantage of their leading competitive positioning to drive AUM growth across product and distribution categories.

[James O'Sullivan, CEO at IGM Financial Inc.]

Northleaf achieved higher fundraising results this quarter than any period we've recorded to date. 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

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.

[James O'Sullivan, CEO at IGM Financial Inc.]

However, recent volatility has partially offset gains from the first seven 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

This is encouraging. While the Bank of Canada decision in June and 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

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 AUM and AUA, which reached a record high at the end of Q2 and began in July.

[James O'Sullivan, CEO at IGM Financial Inc.]

On the right is our second 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. On slide 13, we present ending AUM and AUA 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.

[Damon Murchison, CEO at IG Wealth Management]

Thank you, James, and good morning, everyone. Turn to slide 15 in the wealth management second quarter highlights, including IG Wealth, Rockefeller, and Wealthsimple. IG Wealth ended the quarter with AUA of CAD 130 billion, up a solid 11% year-over-year and 1.3% during the second quarter, driven by financial markets. Gross inflows of CAD 3.6 billion represented our best second quarter in gross inflows on record.

[Damon Murchison, CEO at IG Wealth Management]

Net outflows were CAD 173 million during the quarter. 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 CAD 271 million and net inflows of CAD 262 million-- CAD 262 million.

[Damon Murchison, CEO at IG Wealth Management]

Total gross inflows from newly acquired clients of $1.2 billion 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.

[Damon Murchison, CEO at IG Wealth Management]

We view these improvements as 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 the competitive environment.

[Damon Murchison, CEO at IG Wealth Management]

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 Wealthsimple once again had very strong quarters, which I will speak to on the coming slides. Turn 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.

[Damon Murchison, CEO at IG Wealth Management]

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 shell.

[Damon Murchison, CEO at IG Wealth Management]

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, clear positive turn in our total net flows and IGM product net sales. There's a little bit of noise in our 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.

[Damon Murchison, CEO at IG Wealth Management]

As we look for positive sentiment to fully return, our advisors continue to work with their clients to save and build wealth. 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 gross outflow rate remains elevated versus last year, and redemptions continued predominantly to be partial in nature.

[Damon Murchison, CEO at IG Wealth Management]

At the bottom right, you 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. Turn to slide 18. As mentioned, the CAD 1.2 billion of gross inflows from newly acquired clients during the second quarter represented our best quarter on record for new client acquisition.

[Damon Murchison, CEO at IG Wealth Management]

During the second quarter, gross inflows from mass affluent and high-net-worth clients represented over 75% of gross flows from newly acquired clients, with million-dollar-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. Turn to slide 19. This shows the productivity of our advisors.

[Damon Murchison, CEO at IG Wealth Management]

As we drive growth in the mass affluent and high worth segments, the increases in productivity that we continue to show are a testament to where we have invested. We expect to see a continuation of this trend. Turn to slide 20, an update on our focus of building our business to capitalize on industry wealth drivers.

[Damon Murchison, CEO at IG Wealth Management]

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.

[Damon Murchison, CEO at IG Wealth Management]

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 enhance 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.

[Damon Murchison, CEO at IG Wealth Management]

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 has driven $4.9 billion 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, let's talk about Wealthsimple.

[Damon Murchison, CEO at IG Wealth Management]

Wealthsimple continued to reinforce their position as an important and growing player in the Canadian wealth management ecosystem. Wealthsimple ended Q2 with over CAD 43 billion 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 2.5 million clients. With that, I'll turn the call over to Luke Gould.

[Luke Gould, CEO at Mackenzie Investments]

Great. Thanks, Damon. Good morning, everyone. So turn to page 24, a few comments on the quarter. Similar to Q1, this continued 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.

[Luke Gould, CEO at Mackenzie Investments]

Higher asset levels and operating leverage led to our earnings at Mackenzie being up 12% in the quarter and the highest Q2 in 15 years. On point two, investment funds experienced net, net redemptions of CAD 745 million during the quarter, and this is in the context of continued net redemptions in the industry.

[Luke Gould, CEO at Mackenzie Investments]

We saw slight year-over-year improvements for industry long-term fund flows in Q2, as reviewed by James and Damon, and this trend continued into July, and we at Mackenzie had gross sales up 38% and noticeable net sales improvements. In point 3, the share of our assets in four- and five-star funds remained relatively unchanged quarter-over-quarter at 52%, and during the quarter, we had a number of product launches.

[Luke Gould, CEO at Mackenzie Investments]

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.

[Luke Gould, CEO at Mackenzie Investments]

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.

[Luke Gould, CEO at Mackenzie Investments]

We also launched an ETF version of our flagship global dividend fund, and you can expect us 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 on our shelf relative to some of the important flagships of our competitors in the market. Both ChinaAMC on the right and Northleaf delivered strong results, as reviewed by James.

[Luke Gould, CEO at Mackenzie Investments]

ChinaAMC had another strong quarter net flows, with RMB 41 billion, or CAD 8 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. Northleaf delivered CAD 1.8 billion in 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.

[Luke Gould, CEO at Mackenzie Investments]

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.

[Luke Gould, CEO at Mackenzie Investments]

This is being offset by improvements elsewhere that I'll review on coming slides. I'd also highlight in the top left the improvement in gross and net sales in July, with gross sales up 38% and net redemptions improved to CAD 73 million from CAD 224 million the prior year.

[Luke Gould, CEO at Mackenzie Investments]

We're encouraged by these signs of improvement in the industry, and as we move through the back half of 2024, we feel we're well positioned with compelling performance across multiple relevant mandates. Turning to page 26, the only remark I'm going to make is to the top right. You can see our Morningstar rankings remain relatively in line with last quarter and the industry.

[Luke Gould, CEO at Mackenzie Investments]

On performance, I'd highlight that the broadening of market movements in July and 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.

[Luke Gould, CEO at Mackenzie Investments]

In the middle, I'd highlight that our growth, Bluewater, and Greenchip 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. 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, these boutiques. I'd also highlight the performance strength and the emerging sales momentum in some very large categories with our global equity team...

[Luke Gould, CEO at Mackenzie Investments]

Sorry, our global quant equity team, our global equity and income team, as well as the Putnam-advised all-US 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 five weeks, and we've seen meaningful performance improvements in some of our boutiques.

[Luke Gould, CEO at Mackenzie Investments]

For example, in Ivy, most mandates now sit top quartile across time horizons as we've moved through July and August. Turning to page 28, you can see the continuous strength of both AUM growth and net flows in the Chinese investment fund industry. On the left-hand side, the second quarter once again had very strong flows, with Q2 net sales of RMB 1.8 trillion, or approximately CAD 340 billion. Long-term fund net sales made up the majority...

[Luke Gould, CEO at Mackenzie Investments]

Long-term fund net sales was the majority of Q2 sales, as opposed to money market funds, 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.

[Luke Gould, CEO at Mackenzie Investments]

And importantly, on the right, you can see China AMC's continued strong market position, ranking number two 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 twelve months versus the industry growth of 10%. I should also highlight that China AMC was the net sales leader over the last twelve months, with RMB 282 billion, or $50 billion over the period.

[Luke Gould, CEO at Mackenzie Investments]

On page 29, you can see the continued growth in China AMC'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. As mentioned, these increases were driven substantially by net sales, which you can see in the chart at the bottom.

[Luke Gould, CEO at Mackenzie Investments]

Lastly, on page 30, you can see another quarter of continued strong growth at Northleaf, with CAD 1.8 billion in new commitments and CAD 4.6 billion over the last 12 months. Northleaf has consistently put on about CAD 1 billion new commitments each quarter since we formed our partnership with them in 2000, and this CAD 1.8 billion was the strongest quarter yet.

[Luke Gould, CEO at Mackenzie Investments]

The fundraising during 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. I'll turn the call over to Keith Potter.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

Thank you, Luke, and good morning, everyone. On slide 32, you can see key highlights for Q2. Adjusted EPS of CAD 0.93, excluding other items at Lifeco and one-time debt refinancing charges at Rockefeller. Adjusted earnings were 4.5% year-over-year, our second highest Q2 on record.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

We returned CAD 171 million to shareholders in the quarter through quarterly dividend and continued to be active in our NCIB program, repurchasing CAD 37 million in shares. 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 CAD 722 million to CAD 835 million, which is fair value to our other comprehensive income.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

And finally, on ChinaAMC, 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&A and flows. And coming off a strong Q1, ending AUM&A was relatively unchanged, up 0.1%, while average assets increased 2.4%.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

Turning to slide 34, we have our consolidated earnings at IGM. Growth in average AUM&A supported higher revenues in both our wealth and asset management segments. And on point two, as James highlighted earlier in the call, our operations and support and business development expenses were up 4.9% on our 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.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

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. 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-net-worth clients.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

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 HISAs. With stable product mix and continued success in the mass affluent and high-net-worth segment, we'd expect a decrease of closer to 0.5 basis points per quarter in this rate. Finally, you can also see product fees and asset-based compensation rates were stable for the quarter.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

On slide 36, IG's overall earnings were CAD 111.7 million in Q2. On point 1, advisory and product and program fees are up year-over-year and relative to last quarter. And on point 2, year-over-year financial planning revenues are in line with 2023, and another strong quarter for insurance results were offset by lower mortgage income.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

As Damon commented, we saw strong mortgage volumes within a competitive environment, which is great. However, our lower mortgage income was driven 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 first quarter. Looking forward, we expect to continue to see year-over-year growth in the business.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

As a reminder, other product commissions will move in a similar direction as revenue, which you can see in the table, included in point two, 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. On the left, you can see average AUM is up 1.4%, and on the right, the overall third-party rate was unchanged in the quarter at 53 basis points.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

The top line, which 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 CAD 55.9 million is up 11.6% year-over-year.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

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. Slide 39 has ChinaAMC results. Two quick points. First, on the left, AUM continues to increase, with ending AUM of RMB 2.2 trillion, up 20% year-over-year, including RMB 65 billion in Q2 total net flows.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

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. 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.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

As mentioned, Rockefeller has refinanced debt this quarter on a more favorable terms, which is reflective of the progress being made, and the CAD 3.3 million 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.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

Main comment is on Wealthsimple, and once again, we have increased the fair value to CAD 835 million. It's reflective of their exceptional performance during Q2, public peer evaluations, and also revised revenue expectations for the company.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

... And from IGM's valuation perspective, our strategic investments now represent CAD 3.53 billion in value. And 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.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

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 CAD 379 million. As we move into the back half of the year, we will continue to execute on our NCIB while focusing on our growth-oriented business priorities.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

Before I turn over the call to the operator, on behalf of IGM, we would like to acknowledge that this will be Jeff Kwan's last call covering IGM. I would 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. That concludes my remarks, and I'll turn over the call for questions.

[Operator]

We will now begin the question-and-answer session. To join the question queue, you may press Star and One on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star and Two. We will pause for a moment as callers join the queue. Thank you for your patience. The first question today comes from Jeffrey Kwan with RBCCM. Please go ahead.

[Geoffrey Kwan, Equity Research at RBC]

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, you know, how you're thinking about capital allocation, given, I guess, the pause in on M&A, the free cash 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

Yeah. Thanks, Jeff. And again, congratulations to you. You know, we stated at Investor Day that we feel we were, and are, done with M&A, at least for a period of time. And by that I mean kind of chunky M&A, M&A of any kind of moderate to large size. There's always very small stuff to be done. And I think we're in that period now.

[James O'Sullivan, CEO at IGM Financial Inc.]

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 you know, that's very much what we're doing. So, you know, the first use of free cash flow very clearly is the dividend.

[James O'Sullivan, CEO at IGM Financial Inc.]

We remain as committed as ever to that. We have started a buyback, and I believe this quarter we repurchased about CAD 37 million worth of shares. I think that's a reasonable run rate. I think you should expect that to continue. I mean, we would buy more at lower levels and less at higher levels, but, you know, it's not a bad estimate, I would say. So, you know, 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&A here.

[James O'Sullivan, CEO at IGM Financial Inc.]

Although, as I've said, just to cover myself, if the phone rings, we'll answer it. But we're really happy with the architecture that we have with two divisions, three wealth management companies, three asset management companies. We think it's a great lineup. We're investing in it, and we believe it'll generate higher growth and ultimately higher dividends over time.

[Geoffrey Kwan, Equity Research at RBC]

Thanks for that, James. I guess maybe that was a little bit of my follow-on question is, is the kind of the 2- to 3-year 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?

[Geoffrey Kwan, Equity Research at RBC]

Is it driven by, you know, 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, you know, all else equal, something that interests you the most? Like, is it taking a bigger stake in Rockefeller, or is it, you know, acquiring an asset manager as a capability to the shelf or something else?

[James O'Sullivan, CEO at IGM Financial Inc.]

Sure. Well, it's -- look, it's not driven by leverage. Our leverage ratio as we disclose this quarter is about 1.6 times. So we continue to have a very conservative leverage profile or debt to EBITDA profile.

[James O'Sullivan, CEO at IGM Financial Inc.]

So leverage is not it at all. I'd say it's driven by two things. One is following a period where we did a fair bit of M&A, obviously, ChinaAMC and Rockefeller and IPC, 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

Not just our capital, our human resource talent, our time and attention to make those businesses as strong as they can possibly be in 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.

[James O'Sullivan, CEO at IGM Financial Inc.]

The second thing I would say, Jeff, is that we're also kind of looking out, and we're saying, you know, when might. Like, as I said, we love the architecture, two divisions, three businesses in each division. When might opportunity next present itself in respect of things we currently own some of? And all of that kind of aligns with, you know, the two or three-year window that I talked about.

[James O'Sullivan, CEO at IGM Financial Inc.]

And so there will be an opportunity to do more at Northleaf. There will, I expect, in the fullness of time, be an opportunity to do more with Rockefeller, and we'll see how the others, you know, we'll see what happens to others, including, for example, Wealthsimple.

[James O'Sullivan, CEO at IGM Financial Inc.]

So I would—it was not leverage. It was a desire really, to focus on—spend a period of time focused on our two big core businesses. And then we looked out over the horizon, and we said, "You know, 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.

[Geoffrey Kwan, Equity Research at RBC]

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 change, capital gains tax changes.

[Geoffrey Kwan, Equity Research at RBC]

But bigger picture, the industry net redemptions are hopefully going to improve as we exit 2024, albeit maybe gradually. 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 1-2 years?

[Damon Murchison, CEO at IG Wealth Management]

Okay, 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 three primary drivers there. One would be, as you mentioned, the capital gains and, you know, working with our clients and allowing them to crystallize some gains and take advantage of the lower inclusion rate that drove money into cash.

[Damon Murchison, CEO at IG Wealth Management]

A lot of it was invested in June, but some of it remained in July. We were able to reinvest in July. But the good thing about that as well, you know, 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.

[Damon Murchison, CEO at IG Wealth Management]

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. 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, you know, some money be invested, which is great to see.

[Damon Murchison, CEO at IG Wealth Management]

And the third, which is the largest driver, is that we've just done a fantastic job on new client acquisition. What you see right now is 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...

[Damon Murchison, CEO at IG Wealth Management]

You can see the buildup, and we've steadily been improving here. I fully expect that to continue over time. In terms of the growth 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. And 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 many much change as it relates to growth sales.

[Luke Gould, CEO at Mackenzie Investments]

Yeah, Jeff, it's, it's Luke. I guess two things. One, thanks again for your coverage. It's, it's been great over a very, very long time, as, as Keith said, I echo his sentiment. On, on page ten, you got to walk before you run. 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 ten lays out what we saw in Q2 by product category.

[Luke Gould, CEO at Mackenzie Investments]

And what was noteworthy is the improvement that came in the foreign equity. So those global equity and US equity, we did see some noteworthy improvement in Q2. And then, as mentioned, we got the ETF's preliminary numbers for July yesterday, and it did show a meaningful year-over-year improvement.

[Luke Gould, CEO at Mackenzie Investments]

It, it was positive overall, and, and from the vantage point that we have, it was in those same product categories, with good flows into income as well as good flows into, global and U.S. equity.

[Geoffrey Kwan, Equity Research at RBC]

Okay, perfect. Thanks, everyone.

[Operator]

As a reminder, if you would like to ask a question, please press Star, then one to join the question queue. That's Star, then one. The next question comes from Jamie Golombek with NBF. Please go ahead.

[Jamie Golombek, Managing Director at CIBC]

Yeah, thanks. Actually, just wanted to kind of follow on that last, that last question. Just, looking at Mackenzie's results and the, and the net flows rate at Mackenzie. You know, the industry had a little bit of a pickup here in the last, last few months, but it looks like Mackenzie is still somewhat, somewhat stabilized, at a, slightly lower trend.

[Jamie Golombek, Managing Director at CIBC]

So maybe, maybe talk through some of the, the potential, drivers of, of that performance. You know, given that some of the, the positive remarks you made about the, the underlying fund performance and, and, and success of the, of the, of the, of the ratings.

[Luke Gould, CEO at Mackenzie Investments]

Yeah, you got it, Jamie. Good, 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, you know, high conviction, high discipline boutiques like Bluewater and Greenship, which focuses on obviously thematic investing to combat climate change.

[Luke Gould, CEO at Mackenzie Investments]

What we've seen there is weaker short-term performance as these boutiques have stuck to their discipline. And you can see on this slide, the year-over-year net sales declined, and that 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.

[Luke Gould, CEO at Mackenzie Investments]

And you can see that the declines in those boutiques is being offset by a sales momentum in the global quant equity boutique, the global equity and income boutique, and again, I mentioned our US all cap growth mandate, advised by Putnam, as well as some improvement in fixed income.

[Luke Gould, CEO at Mackenzie Investments]

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.

[Jamie Golombek, Managing Director at CIBC]

Okay, understood. Over to the IG Wealth Management business. You highlighted the decline in advisory fee rates. 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... Remind me what that sort of run rate would be.

[Jamie Golombek, Managing Director at CIBC]

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?

[Keith Potter, EVP and CFO at IGM Financial Inc.]

Yeah, sure. It's Keith here. Thanks, James. Yeah, so the, I did comment that, you know, if you just have product mix fairly stable as we, you know, move toward positive net flows, and you just have the mix shift toward the mass affluent high net worth, you know, about 0.5 basis points per quarter would be pretty reasonable.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

And we would have been in that territory a little bit higher than that this quarter, but there were strong market returns. The other influencing factor would be, we have internal cash where we are in a spread, and then we don't charge advisory fees to speak of when we're into other short-term and cash, like GICs or HISA.

[Keith Potter, EVP and CFO at IGM Financial Inc.]

And that's what you saw this quarter, that we wouldn't expect that, you know, to continue.There will be volatility. We saw a bit of that last quarter as well, and in prior quarters, it's fairly stable. But I would, you know, guide to 0.5 basis points, subject to mix and product mix.

[Jamie Golombek, Managing Director at CIBC]

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 8, you know, 4-6 quarters, but beyond that, it's more challenging? What, what are some thoughts on that?

[Keith Potter, EVP and CFO at IGM Financial Inc.]

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

[Jamie Golombek, Managing Director at CIBC]

Yeah. Okay, understood. Thanks very much.

[Operator]

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

[Keith Potter, EVP and CFO at IGM Financial Inc.]

Okay. 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 line. Thank you for participating, and have a pleasant day.

Participants

Executives

• James O'Sullivan, CEO
• Keith Potter, EVP and CFO
• Kyle Martens, Head of Investor Relations

Analysts

• Damon Murchison, CEO at IG Wealth Management
• Geoffrey Kwan, Equity Research at RBC
• Jamie Golombek, Managing Director at CIBC
• Luke Gould, CEO at Mackenzie Investments