AGF Management Limited

Ladies and gentlemen, thank you for standing by, and welcome to the first quarter 2023 HEF Management Limited Earnings Conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference. Ms. Quinn, you may begin.

Thank you, Walter Rader, and good morning, everyone. I'm Jenny Quinn, Vice President and Interim Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the first quarter of fiscal 2023. 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 Distribution, will also be available to address questions. Turning to slide four, I'll provide the agenda for today's call. We will discuss highlights of Q1 2023, provide an update on the key segments of our business, review our financial results, discuss our capital and liquidity position, and finally, followed by outlining our focus for the remainder of 2023. After the prepared remarks, we will be happy to take questions. With that, I will now turn the call over to Kevin.

Thank you, Jenny, and thank you, everyone, for joining us today. In the first quarter of 2023, markets experienced volatility. That volatility has continued into March and will likely remain for as long as there is uncertainty about the overall state of the economy and the banking system. Despite the volatility, we reported AUM and fee earning assets of $41.9 billion at the end of Q1, which was flat from Q1 of 2022. This reflects our strong business momentum, as the S&P 500 was down 9% over the same comparative period. Our mutual fund business reported net sales of $221 million in the quarter, marking the 10th consecutive quarter of positive mutual fund net sales, supporting our positive fund flows was our strong investment 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 targeted an average percentile ranking versus peers of 50% over any one-year period and 40% over the three years. At the end of Q1, our average percentile ranking was in the 36th percentile over the past one year and the 33rd percentile over the past three years, with 60% of our Series F funds having a four or five-star overall Morningstar rating. We are also pleased to report that at the end of Q1, 70% of our strategies on a one-year basis and 75% on a three-year basis outperformed our peers. In addition, four of our funds, AGF Global Select Fund, AGF American Growth Class, AGF Global Convertible Bond Fund, and the AGF Fixed Income Plus Fund earned the Fund Grade A-plus awards, which were given annually to investment funds and their managers who have shown consistent, outstanding, risk-adjusted performance throughout the year. Diluted EPS for the quarter was $0.26 per share. Finally, the Board declared an $0.11 per share dividend for Q1 of 2023 for shareholders of record on April 11th, representing a 10% dividend increase. This is the third consecutive year but we have increased our dividend. The increase is a recognition of our strong business momentum and capital position and is in line with our balanced capital allocation approach. 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 disclosed in our MD&A and show comparisons to the prior year. Mutual fund AUM increased 2% year over year, I'll provide some color on our mutual fund business in a moment. Institutional, sub-advisory, and ETF AUM decreased by 3% compared to the prior year, mainly due to the market. Our U.S. SMA relationships continue to generate positive flows as we continued our strategy to expand the U.S. SMA business. We're currently onboarding one of our strategies onto one of the largest wealth management platforms in the U.S. and expect AUM in this category to grow gradually over time. Liquid alternative products continue to attract interest from investors who are looking for a strategic or tactical hedge for their portfolios. Managed by our quantitative team in the US, our market neutral anti-beta strategy is designed to generate positive returns in volatile markets and preserve capital in a downturn. At the end of the quarter, AUM for this strategy has increased by 63% to $932 million over the past year. Finally, We continue to see interest from institutional investors across multiple strategies and jurisdictions, which bodes well for future sales. Our private wealth business continues to demonstrate resiliency, with AUM decreasing 2% year-over-year due to market declines. Our private capital AUM and fee-earning assets were $2.1 billion at the end of the quarter. It is our goal to grow and diversify our private markets business and to be one of Canada's emerging leaders in private markets investing. We have a pipeline of private capital opportunities that we are working through and will continue to take a measured approach in evaluating the opportunities to ensure an alignment to our strategic plan and to deliver shareholder value. Turning to slide seven, I will provide some details on the fund business. Mutual fund industry experienced net outflows for the fourth consecutive quarter, reporting net redemptions of approximately $8.5 billion. Despite the challenging industry backdrop, our mutual fund business remained in positive net inflows for the 10th consecutive quarter and recorded $221 million of net sales. AGF's outperformance to the industry is attributable to our strong investment performance, our strong brand, and the diversity of our sales channels and our team's continued efforts to build key relationships with our clients and partners. With that, I will turn the call back over to Jenny.