AGF Management Limited

Welcome to the Q1 2022 AGF Management Limited Earnings Conference Call. My name is James, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the Q&A session, if you have a question, please press star 1 on your phone, and also note that this conference is being recorded. I'd now like to turn the call over to Adrienne Basaraba. Mr. Basaraba, you may begin.

Thank you, operator. Good morning, everyone. I'm Adrian Basarab, Senior Vice President and Chief Financial Officer of AGF Management Limited. Today, we'll be discussing the financial results for the first quarter of fiscal 2022. Slides supporting today's call and webcast can be found in the Investor Relations section of AGF.com. Also speaking on the call today will be Kevin McCready, Chief Executive Officer and Chief Investment Officer. For the question and answer period with investment analysts following the presentation, Judy Goldring, President and Head of Global Distributions. We'll also be available to address your questions. Turning to slide four, I'll provide the agenda for today's call. We will discuss highlights of Q1 2022, provide an update on the key segments of our business, review our financial results, discuss our capital and liquidity position, and finally, close by outlining our focus for the remainder of 2022. After the prepared remarks, we'll be happy to take questions. With that, I'll turn the call over to Kevin.

Thank you, Adrian, and thank you everyone for joining us today. The first quarter of 2022 saw increased volatility and a downturn in the markets as the world grappled with the conflict between Russia and Ukraine, the rise in inflation, and ongoing concerns about the COVID-19 pandemic. With respect to the conflict in Ukraine, AGF joined industry and business community participants in early March in signing an open letter encouraging our government leaders to take additional actions in support of the people of Ukraine and against Russia. Prior to the conflict, AGF had approximately $24 million in or six-hundredths of 1% of our total AUM and fee-earning assets of Russian holdings under management. Through this initiative, we have divested 13 million of such holdings in early March and are committing to divesting the remaining holdings as exchanges allow for divestment. Despite the rise in market volatility, Q1 was a strong quarter for AJF. I'll begin with some highlights. AUM and fee-earning assets were $42 billion at the end of Q1, an increase of $2.7 billion compared to Q1 of 2021. Our mutual fund business reported net sales of $330 million in the quarter, marking the sixth consecutive quarter of mutual fund net sales. We reported diluted EPS of 18 cents, up 125 percent from the eight cents reported a year ago. In addition, four of our funds, the AGF Global Select Fund, AGF U.S. Small and Mid-Cap Fund, the AGF Global Convertible Bond Fund, and the AGFIQ Global Multi-Sector Bond ETF to earn fund-grade A-plus awards, which are given annually to investment funds and their managers who have shown consistent, outstanding, risk-adjusted performance throughout the year. Private alternatives are an integral part of our growth strategy, and in mid-February, we welcomed Ash Lawrence as Senior Vice President and Head of Alternatives to lead the growth of this business. Finally, the Board declared a 10 cents per share dividend for Q1 2022, for shareholders of record on April 8th, representing an 11 percent dividend increase. Starting on slide six, we will provide updates on our business performance. On this slide, we break down our total AUM and fee earning assets in the categories this flows in our MD&A and show comparisons to the prior year. Mutual fund AUM increased by 10 percent. I'll provide some color on our fund business in a moment. Institutional sub-advisory and ETF AUM decreased compared to prior year mainly due to one large client redemption that we disclosed in the previous quarters. Looking ahead we continue to see positive flows from two large US institutions who selected a number of our strategies on their SMA platforms. AUM from these relationships will continue to grow gradually over time. We also continue to see interest from institutional investors in a number of our strategies including our global and sustainable offerings, which bodes well for future sales. Our private client businesses continue to demonstrate consistent, steady growth, with AUM increasing 13% year over year. Our private alternatives AUM and fee-earning assets were $2.2 billion. It is our goal to reach $5 billion in AUM and fee-earning assets by the end of this year. However, timing of this target could slip into 2023 a bit, as we progress through our pipeline of opportunities in the alternative space and depending on timing of fund closes. Turning to slide seven, I will provide some detail on the mutual fund business. After a record year, the Canadian mutual fund industry net flows softened in early 2022, reporting net sales of $18 billion for the three months ending February 2022, down 55% year over year. Excluding net flows from institutional clients invested in mutual funds, our net sales were $330 million compared to $376 million in Q1 of last year, down only 12% year-over-year, outperforming the industry by 43 percentage points. AGF sales outpaced that of the industry. When comparing Q1 to prior year, gross sales for our retail mutual funds decreased by 4% to $989 million compared to a decrease of 8% and long-term funds for the industry. We saw strong flows into multiple categories, including global and U.S. equities and sustainable opportunities. AGF's outperforming the industry is attributable to the diversity of our distribution strategy. We are focused on building distribution channels that cater to our clients' wealth advisory segments and our strategic partners, including a focus on the mass affluent market. Before I return the call back to Adrian, I want to give a quick update on performance. AGF measures mutual fund performance by comparing gross returns before fees relative to peers within the same category, with the first percentile being the best possible performance. We target an average percentile ranking versus peers of 50% over any one year and 40% over the three-year period. At the end of Q1, average percentile rankings were 56% over the past one year and 46% over the past three years. It is important to note that three-year performance of our top-selling funds have largely remained in the top quartile. With that, I will turn the call back over to Adrian.