AGF Management Limited

Thank you for standing by and welcome to the Q3 2023 AGF Management Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. After the 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. Mr. Tseng, you may begin.

Thank you, operator, and good morning, everyone. I'm Ken Tseng, Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the third quarter of fiscal 2023. Slides supporting today's call and webcast can be found in the Investors Relations section of AGF.com. Also speaking on the call today will be Kevin McCready, Chief Executive Officer and Chief Investment Officer. For the questions and answers period following this presentation, Judy Goldring, President and Head of Global Distribution, and Jenny Quinn, Chief Accounting Officer, will also be available. Turning to slide four, I'll provide the agenda for today's call. We will discuss highlights of Q3 2023, provide an update on our business, review our financial results, discuss our capital and liquidity position, And finally, close by summarizing the key investment highlights for AGF. After the prepared remarks, we will be happy to take questions. With that, I will now turn the call over to Kevin.

Thank you, Ken, and thank you everyone for joining us today. At the end of Q3, we reported AUM and fee earning assets of $42.3 billion, up 7% from Q3 of 2022. We continue to see strong momentum in our ETFs and SMA AUM, which were up 43% year-over-year. The looted EPS for the quarter was $0.34 per share, up 6% year-over-year. Our capital position remains strong. At the end of Q3, we generated $86 million of free cash flow on a trailing 12-month basis. We also have $144 million available on our credit facility. In addition, we have $30 million in cash and $273 million in short and long-term investments on our balance sheet. We have capital available to strategically invest to generate recurring earnings and return capital to shareholders. Our European subsidiary was once again accepted as a signatory to the UK Stewardship Code, the best practice benchmark in investment stewardship. This stands as a testament to the rigor of our responsible investing practices and our focus on our corporate sustainability. 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 8% year-over-year, driven by market and organic growth. And over the same period, the S&P 500 Equal Weighted Index rose only 6%. Starting this quarter, we are providing a breakdown of our ETF and SMA AUM, which was previously included in institutional sub-advisory and ETF AUM. This will provide additional transparency in this category as we focus on our strategy to grow our presence in the investment dealer and SMA channels through the expansion of our vehicle agnostic model. We ended the quarter with $1.3 billion in AUM in this category, which is a $400 million increase compared to a year ago. I'll provide more color on our mutual fund businesses and ETFs and SMA AUM in a moment. Segregated accounts and sub-advisory AUM increased by 2% compared to the prior year. We are currently onboarding one of our global equity strategies onto an institutional platform in Asia, broadening our institutional distribution reach for the strategy. Finally, we continue to see interest from institutional investors across multiple strategies and jurisdictions, which bodes well for future sales. Our private wealth business remained steady with $7.4 billion in AUM, and our private capital AUM and fee-earning assets were $2.1 billion at the end of the quarter. During the quarter, we continued to work through an active pipeline of private capital opportunities within Canada and the U.S. It is our goal to grow and diversify our private markets business to be one of Canada's emerging leaders in private market investing. Turning to slide seven, I'll provide some details on the mutual fund business. The Canadian mutual fund industry experienced net outflows of approximately $19 billion in the quarter. This was the industry's sixth consecutive quarter of net outflows and has also been the longest quarterly streak of industry outflows in the past 20 years, demonstrating a persistent weakness in investor sentiment. On the back of dampened industry flows, our mutual fund business reported net redemptions of $151 million in the quarter. This is the first quarter of negative flows in three years relative to this very difficult industry backdrop. The net outflows in the quarter were driven entirely by an uptick in redemptions. Our mutual fund gross sales of $633 million in the quarter were actually up 7% from the same quarter last year. The industry continues to experience redemptions as investors are feeling the pressure of sustained higher inflation and interest rates. This is leading investors to move funds out of mutual funds into cash or to pay bills. While AGF redemptions have increased, our redemption rate of 13% is one of the lowest in the industry and better than the overall average of 15%. Given our relative success on gross sales and redemptions, our net redemptions as a percentage of our AUM in the quarter were 0.6 or six-tenths of 1%, while the industry contracted a full 1%. We have been consistently outperforming the industry in gaining market share from our competitors, achieving net sales of $412 million in the last six quarters, while the industry suffered net redemptions of $102 billion in that comparable period. AGF's outperformance to the industry is attributable to our disciplined investment process, a strong brand, increasing diversity of our sales channels, product vehicles, and client base, as well as our team's continued efforts to build key relationships with our clients and partners. I want to now give a quick update on our 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-year period. At the end of Q3, our average percentile ranking was 64% over the past one year and 42% over the past three years. Our one-year performance continued to be impacted by the narrowness of the market exhibited in the first half of 2023, led by a small group of US mega-cap tech stocks. AGF funds have been actively managed and have generally been underweight mega-cap tech versus peer and have had a bias towards smaller, large-cap, and mid-cap stocks, where we see better long-term investment opportunities. Our long-term fund performance remains solid with approximately two-thirds of our strategies outperforming our peers on a three- and five-year basis. We remain confident in our investment management team and our disciplined investment processes given our extensive collective experience and demonstrated ability to navigate challenging markets in the past. As I mentioned earlier, we are providing a breakdown of our ETF and SMA AUM starting this quarter. The AUM in this category has grown 49% on a compounded basis over the last two years. Included in this number are Canadian and US ETFs and SMA platforms. We have seen consistent growth and momentum in the SMA business, both in the US and Canada, where a number of strategies are available on leading SMA and wealth management platforms. With that, I will turn the call over to Ken.