AGF Management Limited

Thank you for standing by and welcome to the Q4 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 this 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 Tsang, Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the fourth quarter and 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 questions and answers period with investment analysts following this presentation, Judy Goldring, President and Head of Global Distribution, and Ash Lawrence, Head of Private Capital, 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 the fourth quarter and fiscal 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. 2023 was another year characterized by challenging market and business conditions, where elevated interest rates and consumer prices continue to dampen investor sentiment. We demonstrated our resilience and continue to execute on a long-term plan to diversify our business across asset classes and client channels, giving us the stability to persevere and grow. We ended the year with AUM and fee-earning assets of $42.2 billion. We continue to see strong momentum in our ETF and SMA AUM, which was up 19% year-over-year. The AGF European Equity class won a 2023 Liber Fund Award on a three-year performance in the European Equity category. Adjusted diluted EPS for the year was $1.34 per share, up 33% year-over-year. Our capital position remains strong, and as of November 23, we generated $80 million of free cash flow for the year and have $144 million available on our credit facility. In addition, we have $50 million in cash and $277 million in short- and long-term investments on our balance sheet. We have capital available and flexibility on our capital allocation strategy. We also paid a quarterly dividend of 11 cents per share for the fourth quarter. And last week, we announced the acquisition of a 51% interest in Kensington Capital Partners Limited. Kensington is one of Canada's leading alternative investment firms with 2.6 billion in AUM. I'll speak more to this later on, and Ash will be available for questions. 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 compared to the industry, which increased by only three-tenths of 1%. Recall that starting last quarter, we are providing a breakdown of our ETF and SMA AUM, which was previously included in the institutional sub-advisory ETF AUM. This provides additional transparency in this category as we focus our strategy to grow our presence in the investment dealer and SMA channels through the expansion of our vehicle agnostic model. We ended the year with $1.5 billion of AUM in this category, an increase of over $200 million from a year ago. I'll provide more color on our mutual fund business and ETFs and SMA AUM in a moment. Segregated accounts and sub-advisory AUM decreased by 6% compared to the prior year. The decline was mainly driven by institutional clients continuing to reduce exposure to public equities, as well as dampened investor sentiment. During the quarter, we onboarded one of our global equity strategies onto an institutional platform in Asia. Getting onto this platform expands our distribution reach for the strategy, and we expect AUM from this platform to build over time. 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 $7.3 billion in AUM, and our private capital AUM and fee earning assets were $2.1 billion at the end of the quarter. Closing the Kensington transaction will increase our private capital assets to $4.7 billion. Turning to slide 7, I'll provide some details on the mutual fund business. Canadian mutual fund industry experienced net outflows of approximately $33 billion in the quarter. This was the industry's seventh consecutive quarter of net outflows and has extended the longest quarterly streak of industry outflows in over 20 years, demonstrating a persistent weakness in investors' sentiment. The Canadian mutual fund industry started its net redemption trend in Q2 of 2022 when the Bank of Canada started raising rates. That trend continued this quarter with investors feeling the pressure of sustained higher interest rates and consumer prices leading them to move money out of mutual funds and into cash, which they are using to pay bills or holding in investments with higher interest or guaranteed returns. Despite that backdrop, we are pleased with how resilient our net flows have been as we continue to outperform the industry. On the back of dampened industry flows, we reported retail mutual fund net redemptions of $194 million for the quarter. During the quarter, AGF's net redemptions as a percentage of AUM was 90 basis points, half the industry's level of 1.8%. Since the industry turned to net redemptions in Q2 of 2022, the industry has suffered over $136 billion of net redemptions, while AGF outperformed the industry and our peers and achieved positive net sales of approximately $200 million for the same period, allowing us to grow our overall market share. These results reflect continued progress of our strategy in 2023 as we focused on diversifying and expanding our client base while evolving our product offerings. 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 and 40% over three years. At the end of Q4, our average percentile ranking was 72% over the past one and 40% 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. LAC's six months performance has been operating at a 50 percentile ranking. AGF funds have been actively managed and have generally been underweight mega cap tech versus peers and have had a bias towards smaller, large cap and mid cap stocks, which saw notably favorable performance in 2022 and the second half of 2023. Our long-term fund performance remains solid with approximately 60% 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 different cycles of the markets in the past. Slide 8 shows our ETF and SMA AUM. The AUM in this category has grown 47% on a compounded basis over the last two years. Included in this number are Canadian and U.S. 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.