CI Financial Corp

TSX:CIX

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the CI Financial 2019 First Quarter Results Webcast. [Operator Instructions] Please take note of the cautionary language regarding forward-looking statements and non-IFRS measures on the second page of the presentation.I would now like to turn the call over to Mr. Peter Anderson, CEO of CI Financial. Mr. Anderson, you may begin.

[Peter William Anderson, President, CEO & Director]

Thanks very much. And just before I get started, I think there may be a bit of a technical glitch and if you are not able to see the slide on the presentation, you can find them on our website. I'm sorry for that. But anyway, thanks very much and welcome to CI Financial's conference call for the first quarter 2019. Joining me on the call as always is Doug Jamieson, our Chief Financial Officer. We also have several Executives available to answer questions on our various businesses. Today's agenda will be like our past calls, I'll provide some industry and CI highlights followed by Doug's discussion on our financials. And then, this will be followed by a business update and a brief discussion of our strategic priorities. At the conclusion, we'll be happy to take questions.First quarter 2019, saw a complete reversal in performance of global markets compared to Q4 of 2018. The S&P and TSX declined 13.5% and 10% respectively in the last quarter of 2018, followed by a very strong positive rebound of 13.5% and 13.3% this past quarter. Volatility of this magnitude creates uncertainty for investors. Despite seeing growth in assets under management, the first quarter was one of the weakest quarters for gross and net sales for the quarter at well over a decade. Year-over-year net sales declined by 60% in the first quarter, making the RSP season one of the worst in the industry -- the industry had seen in recent memory. Money also shifted to other products including GICs, which had significant asset growth in 2018. At CI, we continue to execute on our long-term strategy. Overall, the business continues to operate well.However, like much of the industry, our business remains in redemptions today. None of us at CI are pleased to be in redemptions and there's no higher priority than to return the business to positive sales. To do this, we need to see improvement in industry sales and results for our sales initiatives. We are seeing some signs of improvement in our sales trend and I'm confident the efforts and activities through at all parts of the Company today will generate the results we expect. Despite the challenging environment in our industry, CI maintains a strict control on the controllable parts of our business and this is reflected in our Q1 results. This isn't how we have run the Company since we went public 25 years ago. I'll provide more detail on our various businesses, and our strategy after Doug discusses our financial results.Over to you, Doug.

[Douglas J. Jamieson, Executive VP & CFO]

Peter. [ Turning ] to CI's financial highlights comparing the first quarter to last year's fourth quarter and the first quarter of 2018. Average assets under management were down only slightly quarter-over-quarter at CAD 128.9 billion rounding to a 0% change and were down 9% from a year ago. Ending assets at CAD 131.3 billion were up 6% from year-end assets of CAD 124.4 billion and were 6% below the level of one year ago.Assets under advisement grew 9% during the quarter and are up 7% from one-year ago and this reflects growth at Assante and the addition of WealthBar this quarter. Net income was flat from last quarter at CAD 140 million and down 12% from last year's first quarter. The drop in earnings is primarily due to the 9% decline in average assets under management. On a per share basis, earnings were up 2% from last quarter and down 2% year-over-year, with a 10% difference from the change in net income due to the accretion from share repurchases. Free cash flow was CAD 143.5 million, down 8% from CAD 156.5 million in the fourth quarter and down 14% from CAD 166.9 million a year ago. With most of the variance from the net income percentage change from last quarter due to the CAD 8 million unrealized loss on marketable securities last quarter that completely reversed in this quarter. CI's SG&A was CAD 126.1 million in the first quarter, down from CAD 132.9 million in the first quarter last year in what is typically the high point in quarterly spend in the year.The increase from the fourth quarter relates to annual increases in compensation and higher activity levels in sales. Spend in the Asset Management segment was CAD 101 million compared to CAD 108 million last year and we expect to manage that number lower as we reduce the spend on operating the retail fund side of the business and increase the investment in the distribution side of the business. Here we have the last 5 quarters of CI's quarterly free cash flow and the return to shareholders. The level of share buybacks has moderated, as the majority of the 25.4 million shares available under the normal course issuer bid ending in mid-June 2019 was purchased in the third and fourth quarters of 2018. In the first quarter, free cash flow exceeded dividends and share buybacks by almost CAD 40 million which meant that after spend on capital assets and working capital items gross debt only increased CAD 25 million this quarter in order to fund the purchase of WealthBar in January.With annualized EBITDA at approximately CAD 850 million, CI's gross debt to EBITDA ratio held steady at 1.8x and with net debt at CAD 1.268 billion, the net debt to EBITDA ratio also held steady at 1.5x. CI is on track to repurchase the full 25.4 million shares under this normal course issuer bid by mid-June and we have seen our debt level off. Our current plan remains to maintain debt in the CAD 1.5 billion range and debt to EBITDA in the 1.8x range. We do, however, continue to have the flexibility to manage the amount of issuer bid repurchases while considering CI's share price, changes to EBITDA and cash flows and any acquisition opportunities.I will now turn it back to Peter.

[Peter William Anderson, President, CEO & Director]

Thanks, Doug. For the remainder of our discussion, let me provide an overview of our business lines and the results for Q1 including Retail, Institutional, Assante, Stonegate, GSFM, Investment Management and finally, our Digital Platforms. In our retail business, like the overall industry, gross sales in Q1 was slightly lower compared to Q1 of 2018. But CI has improved by 32% over Q4. Gross redemptions in Q1 significantly improved compared to last year and were flat versus Q4. This resulted in slight increase in net redemptions in last year, but a 30% improvement over Q4 2018.Redemptions can be attributed to several factors, which we have discussed in past calls, including the overall slowdown and sales for the fund industry, fund performance and the business mix of CI's product lineup of Canadian equity, balance and income funds being currently out of favor. The activity level of our sales team has never been higher as we measure the multiple ways our teams connect with advisors and investors. We are pleased with some early signs of improvement in a number of our retail channels, including the broker channel, IIROC, Sun Life and dealers.We continue to launch new products to better serve the evolving needs of investors and advisors. In Q4, we launched CI Private Pools and CI Liquid Alternatives and in Q1 we launched Mosaic, our funded ETF program, all 3 have been very well received despite this challenging environment. And are all meeting the needs of specific investors and advisors. We will continue introducing new and innovative products over the next several quarters. This is just one part of a very important initiative underway at CI to modernize and rationalize their business. In addition to launching new and relevant products, we are taking steps to simplify our overall product offering. Investors and advisors are told that our lineup is too complicated and difficult to understand and we are listening. This is the result of the many acquisition we have done over the last 20 years. We're reviewing all aspects of our lineup, including the total number of funds, portfolio management and product platforms.In addition to being a significant cost saving, we expect this initiative to make CI more efficient and easier for investors and advisors to do business with us. Our institutional business was also in redemptions in Q1 compared to positive sales in the same quarter of 2018. The causes for redemptions in our institutional business include investment management a lag in closing of certain committed institutional sales, the internalization of the CIO role on to consultant platforms and a shift in asset allocation with some institutional investors and consultants. However, as you know, institutional sales can be lumpy. We continue to be engaged in a significant number of searches. And we are in more finals than we have been in recent past. These searches are on both the alliance and our true institutional parts of that business. As well assets have also been committed to various offerings, but have not yet been funded. We recently announced a change in strategy and leadership with our institutional team realigning the business to better fit our existing and future institutional clients. This will provide greater coverage and support going forward. We continue to be very positive about the prospects for growth in our institutional business and believe that will provide essential support to our overall growth -- our sales growth initiatives.At GSFM, Q1 was the first quarter in assets where the Company was in redemption. We are flat quarter in retail and a single large institutional redemption. This is not expected given the volatility in the markets over the last 2 quarters and as I previously said institutional sales are lumpy. One of our goals for GSFM has been to increase the proportion of assets in the significantly higher margin retail part of that business versus our institutional business. We're pleased to report progress on that goal with almost 50% of GSFM's assets now in retail products today versus 35% when we bought the firm in late 2016.As I mentioned on the last call, we are leveraging our ownership of GSFM in expanding -- expanded distribution for our investment management teams in Canada. Cambridge will be launching or sorry has launched a fund in Australia and has recently received 2 strong analyst recommendations, critical to the success of sales growth. Cambridge's global small midcap fund is in a category in demand in Australia for both retail and institutional investors. In addition, late last year, CI launched the Munro Alternative Global Growth Fund in Canada with Munro Partners of Australia. This launch in the Canadian market has also had a very successful start. Munro which is partly owned by GSFM is a great fit within the CI lineup. Assante & Stonegate continue to deliver solid results. We're well ahead of the industry. Their net sales in Q1 were up 4% over the previous year significantly beating their competitors. We continue to see strong growth throughout the high net worth and ultra high net worth business and the number of investors with an excess of CAD 1 million in assets with our advisors continues to grow.In fact, in March, we brought in our largest individual high net worth client to CI with over CAD 150 million in assets. This is a testament to the advisors, its team, the firm and our offerings. We are seeing a significant number of larger clients attracted to Assante & Stonegate because we are an independent firm with exceptional and talented advisor teams. As you know, our objective is to double the assets of Assante & Stonegate over the next 5 years. Although an aggressive goal, I'm confident this is achievable. We continue to be successful and are recruiting experienced and established advisor teams to Assante each quarter. We are enhancing the product offering in the platform and using technology from our digital platforms, BBS and WealthBar.We are continually improving the experience of our investors and advisors. It was announced last month that Assante ranked second by the J.D. Power 2019 Investor Satisfaction survey for full service investment firms for the third year in a row, which speaks to the enduring strength of this business. Our commitment to Assante was an ongoing national advertising campaign, which is supporting our advisors with the theme, this is why we're here. This campaign, a resounding success across Canada. Assante & Stonegate are valuable and integral part of CI Financial. Enhancing and growing this business is one important foundation of CI's overall strategic plan.Within investment management, overall relative short-term performance weakened slightly in the first quarter over the previous quarter. At the same time, 1 and the 3-year performance improved and longer-term performance remained strong. In general, our investment teams remained conservatively positioned holding higher levels of cash. This was shown to be prudent as the market dropped sharply at the end of the last quarter, but in a rapidly rising rally like we had in Q1, especially early in the quarter, all value style are conservatively managed assets will see relative performance lagging. We remain confident in our teams delivering long-term out performance for our investors.Our digital properties WealthBar, BBS, and Virtual Brokers continue to perform very well since they were acquired. These businesses are critical to see our development of a fully integrated and independent platform serving investors across the spectrum in matter of their age, experience, level of asset or investment requirement. Consider for a moment that at CI almost half our employees [indiscernible], most of them would likely not be required necessary to engage with our full service advisor and they may not even want to. However, they still need to invest in TFSAs and RSPs today. Their investable assets will continue to grow and we cannot wait for these young investors and others to become advisors of a client and an advisor at Assante or elsewhere or they may be [indiscernible] to other institutions. So we are building this independent platform to meet their needs today. If in the future they need a support of an advisor, whether it's advice for simple need or a full-service advisor with more complex needs, we'll be there to provide that service as well for them.Our digital platforms are another essential part of CI's long-term strategy. Today, our fully integrated platform including Assante, Stonegate, WealthBar, BBS and Virtual meets most investors needs [indiscernible] do-it-yourself and almost everything in between. We continue to build out this platform and it is our strategic goal to meet the needs of investors today and in the future as well as providing ability -- adaptability as the needs of our investors change in the years ahead. As you heard recently, I advised, the Board, that I will not be renewing my contract when it expires in mid-2020. Although this is a difficult decision, I know it is the right one for me, and more importantly for the Company. The next leader of CI needs a time horizon to execute the Company's strategic plan that is longer than I could commit to the firm. The Board has begun the search and I cannot provide more details or a timeline on this progress. Suffice it to say though that the Board's highest priority is finding the best candidate regardless of how long it takes. My executive committee and I have a lot to get completed before I leave. And I'm confident the Board will find an exceptional CEO to lead CI into the future, and I'm committed to ensuring a smooth transition.As we said earlier, this industry is changing rapidly than in any other time in the past. At CI we remained focused on delivering what's critical today as well as our longer-term strategic priorities including returning the Company to positive sales throughout all of our businesses, expanding our distribution platforms and broadening our access to investors, particularly through Assante, Stonegate and our Digital Platforms. Investing throughout our business in areas such IT operations, investment management, distribution and digital where we see opportunities, reducing the complexity of our overall product lineup, including platforms, funds and investment management. And finally, managing the business with financial prudence as we have done over the last 25 years.And with that, I'd like to say thank you. And we'll now take questions. Operator?

[Operator]

[Operator Instructions] The first question is from Gary Ho of Desjardins Capital Markets.

[Gary Ho, Analyst]

First question, can you talk about the retail environment today. And as you guys progress through 2019, industry flows have been soft, what do you think it will take to turn things around maybe from an industry perspective and from CI perspective?

[Peter William Anderson, President, CEO & Director]

Sure, thanks, Gary. Look, you're absolutely right, I mean, flows have been slower. It's been, I think it's been for a number of reasons. we've certainly seen significant volatility especially in Q4 and Q1 you see an appetite for investors to not only look at alternative products including GICs and also you've been reading in the articles, you've seen investors also paying down some debt. So look, I think, you know, at CI, we continue to be in redemptions. And that's -- and I think the industry is there without any doubt. But it's a business that changes along -- throughout, I mean. So my guess is that, we will continue to see investors investment products that and -- products that are different, products, we're seeing success in our alternatives products, we're seeing investors look at Mosaic, we're seeing our ultra high net worth investors looking at products we offer through -- and high net worth looking to Stonegate and Assante with product and service that we deliver. And so, look, I think it's just a time where volatility has created some uncertainty with investors. And I think time will change that.

[Gary Ho, Analyst]

And then for Doug, you mentioned reducing spend on your business and reinvesting and growing businesses. So maybe you can elaborate on that and where can you take that SG&A line to over time if you could give us some goal post there would be great.

[Douglas J. Jamieson, Executive VP & CFO]

Sure, Gary. Last year we ran CAD 525 million or so and internally we're looking to get that down to around CAD 500 million. And the bulk of that reduction comes on the asset management side. As I said, we're looking to become even more efficient on that side of the business. A lot of that is using technology as Peter said, rationalizing our fund line up, that will save us things like filing fees. And then we do continue to reinvest and invest in new areas on the distribution side of our business. So, balancing it all out, if we can overall cut CAD 20 million to CAD 25 million may mean we cut more than that on the asset management side and spend a little more on the distribution side.

[Gary Ho, Analyst]

Okay. And I just want to be clear that the CAD 525 million and the CAD 500 million that you referenced, those are both after IFRS 16 adjustments. I know there's some reclassification from rent to kind of amortization line.

[Douglas J. Jamieson, Executive VP & CFO]

Right. So this quarter's effect on SG&A is CAD 3 million compared to last year. We've also taken amortization of capital assets out of SG&A and put it into a separate line. So I'm trying to talk in terms of old reporting styles, going from CAD 525 million to CAD 500 million. So, if we adjust for all of that, CAD 525 million probably comes down about CAD 10 million and the CAD 500 million will then have to come down by closer to CAD 20 million to CAD 25 million.

[Gary Ho, Analyst]

Okay. So the CAD 525 million to CAD 500 million is, you're looking at it from the old accounting way.

[Douglas J. Jamieson, Executive VP & CFO]

Right.

[Gary Ho, Analyst]

Got it. Okay, that's helpful. And then maybe just lastly. Peter, just going back to you, on the Grant Samuel side of things flows this quarter. Can you give us an update on the Australian side of the business there?

[Peter William Anderson, President, CEO & Director]

Well, look, yes, I mean, continues to do well. As I said earlier, the -- we've seen a shift of business towards retail, which is great. That is a much higher margin business for us, so we're pleased to see that. We are continuing to be in some very good searches on the institutional side, so I'm not trying to say that we don't want institutional as well, but we're seeing growing business on the retail -- on our retail side. So, Cambridge is going to be launching -- well, it's launched now, but we're going to start the first road show this month. And I would expect to see that to be quite successful. And the businesses continues to be running very, very well. It's meeting all of our expectations aim, but it's not a lot different than what you see in Canada. It's a business where gross sales are declining because of the volatility in the market and just an overall malaise in retail. But I'm continuing to be very, very pleased with what we've done down there and the opportunity for it to continue to grow for us.

[Operator]

The following question is from Geoff Kwan of RBC Capital Markets.

[Geoffrey Kwan, Analyst]

Doug, [indiscernible] I want to quickly clarify. So the number, if we look at on the SG&A, including the cuts, including IFRS 16 is that CAD 475 million to CAD 480 million, is that right?

[Douglas J. Jamieson, Executive VP & CFO]

Yes, that's our aggressive target. Yes.

[Geoffrey Kwan, Analyst]

Okay. I just wanted to make sure the right number. Peter on the CEO search, I know you mentioned, you can't really kind of talk about the timeline, but just wondering if you're able to talk about how involved you'll be in terms of working with the Board on the selection of the next CEO. And if -- and again, I know it's a Board issue, but if you can kind of share, like what are some of the key attributes that they're looking to find in terms of the next CEO?

[Peter William Anderson, President, CEO & Director]

Sure. Yes, the first question is, will I be involved with the search? The answer is yes. I am a Board member and I would say to you that the process is just beginning. So we're -- and there's not a -- certainly not a rush to go through to do this. It will take us the way I would define it or describe, it will take as long as it takes to find the right, the right leader. I think the -- Geoff your other question was, what are we looking in for attributes. I think it's a, the candidate in my mind, particularly I think, I would -- I can speak about the Board to someone who can create a strategy for CI that will lead us into the future. As you know, the industry has completely changed and this business, our business at CI has never been complacent. We've never sat back and assumed that we were doing things the way that we should -- we should do. We're not afraid of change. That goes all the way back to when we made the acquisition of Assante and Stonegate in the early 2000s. And that also goes to the strategy that we've initiated here at CI via acquisition of a ETF platform with First Asset and then buying a robo-platform, an online brokerage firm and a digital platform. So these are -- we're doing is specifically because the industry and the asset management industry and wealth management industry in Canada and globally is changing dramatically. And the leader of this company is going to have to acknowledge that and it's going to have to challenge and test this company and push us forward into that or further forward into the future. I hope that answer your question.

[Geoffrey Kwan, Analyst]

No, it does, thank you. Switching over to on the M&A side, I mean, we've seen I guess a steady flow of acquisitions that are happening in the broader global asset management industry looking for scale and/or distribution, and a lot more we're seeing cross border. Obviously, you guys did this [ entry ] in the Grant Samuel in the past few years, just wondering if -- what seems to be a bit of a tick up in terms of M&A activity has changed your thoughts around the strategy of what you're looking to do timing. targets that sort of stuff.

[Peter William Anderson, President, CEO & Director]

I'm always afraid of talking about M&A because people read it differently. But look, we're a Company that's done acquisitions since 1999. I don't know the exact number, but over the last 3 or 4 years since I came back, we've done 5. I would still say that we're always looking for ideas. We're always looking for things that fit the business and would fit in not just the business today, but business of the future. But on the other side, I would say that today we continue to believe our stock is inexpensive, relative to our peers in Canada and relative to the industry globally. And when you have a multiple on the stock like we have today, we still think that, that buying back our stock is -- continues to be the prudent thing. But I -- so I'm sort of going back and forth on this, but I would say, look, we see things and we see opportunities, ideas. And if we saw something that made a lot of strategic sense, we'd certainly look at it. But at the same time, it would have to make a lot of sense right at the particular moment when our stock trades at where we are. We still think it's using our cash flow to buy back our stock today is the most prudent use of our free cash.

[Geoffrey Kwan, Analyst]

Okay, thanks. And then if I can ask one last question, on the Sun Life side, do you have an update in terms of what sort of sales market share you've got in that channel. And then what the updated AUM you have with the Sun Life advisor network?

[Peter William Anderson, President, CEO & Director]

We don't break that out. But I can say that we continue to have exceptional relationship with Sun Life, both at the Executive level and with the Advisor level. It's a -- I'm constantly encouraged by the relationship we have with advisors and executives. And just like the industry, Sun Life advisors are just as you know are seeing their business being slower. It's no different than anywhere else. But we continue to receive a good share of their business. And we continue to look at them as an important partnership and ally to our Company. And we work very hard with -- through our retail sales team and our national accounts to work through a number of different parts of the Sun Life business and are continue to be encouraged by the relationship and their support to us.

[Operator]

The following question is from Tom MacKinnon of BMO Capital.

[Tom MacKinnon, MD & Analyst]

Two questions, one on the buyback. Should we expect the kind of pace that you had in this quarter, I think it's somewhere around 3 million shares a quarter or do you expect that thing to pickup given the attractive valuation you're sitting at. And how do we square that with respect to your where you want the net debt to EBITDA and your total debt to stay at, especially given the fact you're going to continue to generate good free cash flow.

[Douglas J. Jamieson, Executive VP & CFO]

Hi Tom, it's Doug. We're kind of at the moment bound by what is left in our NCIB until mid-June. So we expect to complete the balance of that this quarter. And that may allow the debt to trend slightly lower this quarter. Once we renew in mid June, we've got a fresh say approximately 22 million shares we can buy. At that point, we can really assess the share price, forecasted levels of cash flow and whether we accelerate the buyback program kind of front-load it for that NCIB, which based on current share prices would be about CAD 400 million or so to execute the entire 22 million shares. So if we pushed some of that instead of doing CAD 100 million a quarter, we could do CAD 120 million or even CAD 150 million in Q3 and Q4 if we wanted to front-load it. So those types of decisions will be based on where we're at mid-June, like I said, relative to the share price and our forecast of free cash.

[Tom MacKinnon, MD & Analyst]

And, I mean, we're only 6 weeks or so or a month away from mid-June right now. Yet to put your forecast hat on, do you think front-loading seems to be a good idea?

[Douglas J. Jamieson, Executive VP & CFO]

Yes, I think we did that last year, we bought a lot more in Q3 and Q4. Unless we saw a reason to hold back a little bit, we would probably do slightly more than CAD 100 million a quarter in Q3.

[Tom MacKinnon, MD & Analyst]

Okay. And then just go back to the SG&A, I know we had a couple of ways of approaching it. If I look at the first quarter's SG&A at CAD 126.1 million and you annualize that you're CAD 504 million. And I think we had -- I think you said, CAD 475 million to CAD 480 million would be an aggressive target. Would that be a 2019 target for that SG&A?

[Douglas J. Jamieson, Executive VP & CFO]

Yes, obviously to get to CAD 480 million, we've got to be running at CAD 120 million a quarter. And I think we can get there. It's can we get below that? Really depends on how much we reinvest in the business because I think on the asset management side, we can make the cuts we need to. So, I think we can get to a CAD 120 million a quarter run rate this year. So that's kind of a -- maybe we won't hit CAD 480 million, just CAD 475 million, CAD 480 million for calendar 2019. But I'd like to get to a run rate of CAD 480 million this year.

[Tom MacKinnon, MD & Analyst]

Okay. And then if we moved into 2020, do we -- do you look for further declines or do we just kind of stay flat or modestly grow that? Or does that depend on the incoming...

[Douglas J. Jamieson, Executive VP & CFO]

It does depend on the opportunities we have to reinvest in the business. Same with 2019, if we decide we do need to spend more on the distribution side, we're going to do it because we have a lot -- we see a lot of same projects we have that, have a high NPV and IRR and we want to accomplish and we can only do so much at a time. So we'll depend a bit on that project flow and other investments we want to make in the business. So I think, I would just say, we'll continue the trend of cutting where we can on the asset management side and reinvesting on the asset admin side.

[Tom MacKinnon, MD & Analyst]

And then the final question has to do with the closed business, the seg fund business, continue to have like CAD 300 million in terms of net outflows per quarter on that. I guess it's just generally outflows because there's really nothing coming in there. Do you capture that or what percentage of that you try to capture or in terms of people get flipped out of the seg fund business and then put into a CI product, are you able to retain any of that? And if not, what are -- what you see as other avenues here to kind of stem the run-off of that business?

[Peter William Anderson, President, CEO & Director]

Yes, hi, it's Peter. The closed seg fund business, the closed block of businesses, it is -- runs off at about CAD 250 million to CAD 300 million a quarter. And that's very steady, that doesn't change and the vast majority of that is income that we, that comes out of the product on a annual or on an annual basis. It's very difficult for us to be able to capture that money back because that ends up, going back to the clients, clients account. We continue to look for opportunities to launch similar products like that. I can't give you too much more detail, but I mean, we would love to be in the market again with another seg fund and we continue to look for that through our product team.

[Tom MacKinnon, MD & Analyst]

Are those maturities on that or is that people withdrawing their complete seg funds, what are those outflows then?

[Peter William Anderson, President, CEO & Director]

No, mostly -- it's mostly income that comes out of the contracts.

[Tom MacKinnon, MD & Analyst]

Okay. So it's not necessarily a redemption then, is it then.

[Peter William Anderson, President, CEO & Director]

Well, we capture it as a redemption because -- but in theory, it's income for the client I think so, is how I would describe.

[Tom MacKinnon, MD & Analyst]

So it's not, the client still essentially has the seg fund and you're still going to get it, whatever you can in terms of fees on that, it's not as the client has withdrawn his money and it's gone now.

[Peter William Anderson, President, CEO & Director]

No, not at all. No, no, it's not a client redeeming like you redeem a fund, it's a part of the contracts -- the commitment for the contract.

[Tom MacKinnon, MD & Analyst]

So, in your opinion, should we be including that when we look at kind of like net redemption, should we include this business because it's not really a client necessarily surrendering the product.

[Peter William Anderson, President, CEO & Director]

If you look at the way that we break up the business for you and the sales is that we capture that in a separate line under closed business. When I look at our retail business, I don't capture that. It shows of another line. But where I focus is on, on the retail side is the sales that we can actually, we can impact. So when I look at our retail net sales of negative 1.6 last year -- last quarter versus negative 2.3, that does not include the -- that doesn't include the closed business. And so, the 1.6 and the significant improvement in my mind, I mean, in a very challenging market is a -- that's the impact of this activity and the hard work of our sales team, retail sales team across the country be able to make those significant changes. So, I don't -- I do not include the closed business in under retail, not the way I look at it.

[Operator]

[Operator Instructions] And the following question is from Scott Chan of Canaccord Genuity.

[Scott Chan]

My question is on the retail side and maybe perhaps for Roy, with the Sentry acquisition, could you kind of give us an update, maybe of your marketing, your wholesaling, and inside team and perhaps on each distribution channel specifically the IIROC one which I believe still struggles on.

[Peter William Anderson, President, CEO & Director]

Yes, unfortunately, Roy is on a plane out to an event out in Calgary, so I'll -- it's Peter -- Scott [indiscernible]. So yes, I mean, we've seen a very solid improvement in on the IIROC side quarter-over-quarter. As I said in the call, we've seen good progress with Sun Life, we've seen good progress with IIROC and we've seen very good progress obviously with Assante & Stonegate. So I don't want to -- we're not running around here giving ourselves, high-fives because we know we have a long way to go. But we certainly are seeing that the work that the -- and the activity that our team has done is certainly -- we've never -- I've never seen activity levels as high as they have been with our retail teams as I see now whether it's calls, meetings, events, all of that. So, yes, I'm very encouraged by the -- by our what our retail teams have been able to do. And as you know it's been a very challenging environment.

[Scott Chan]

And just on the new product side, you launched several new products over the past year, but you mentioned, more to come. Is there kind of a flavor that you can kind of talk about in terms of what type of new products that you're working on?

[Peter William Anderson, President, CEO & Director]

My lawyer is and my Risk Officer is standing beside me and saying -- shaking his head, saying no. And my marketing guy is saying, he doesn't want me to release the stuff either. But suffice it to say, we're going to be bringing product out over the next, definitely over next 2 quarters, things that we believe fit very well in the market, meet the needs of investors and advisors. The only thing I would say about our -- the product launches that we've done recently is that, and I think this would probably be the same as most of our competitors in the sense that, we're building products to meet specific needs of different advisors. So our -- but the encouraging thing is that we see growth in all 3 of the products we've launched over the last 6 months across all of the business lines. So Mosaic, our funded ETFs is -- it's a certain category of advisor investor. Our Liquid Alts again is the same thing. And our Pool is exactly the same. So we're building products for specific investors and advisors and we are going to continue to do that over the next couple of quarters.

[Scott Chan]

And just lastly, Peter, obviously the mutual fund industry has slowed down significantly, ETFs has slowed down a little bit too. Perhaps you can give an update on your, I guess new branding on the CI first half at ETFs and kind of how the flow traction has been there year-to-date?

[Peter William Anderson, President, CEO & Director]

You know, Rohit is here. Why don't I have Rohit just to update you.

[Rohit Dev Mehta, Executive VP & President of First Asset ETFs]

Sure. Hi, Scott. Really you know the branding is around bringing the strength of both business lines and distribution groups together as we continue to harmonize the sales team and look to leverage the strength of the ETF business across not just IIROC but is also through MFDA through funded ETFs et cetera. So that just came out recently, it's been well received by the marketplace. We're keeping both at CI First Asset in the ETF name and that's been positive. Overall our -- as we take a look at the ETF industry, year-over-year from the first quarter was softer, but we've continued to see strength not only in the individual ETF purchases through IIROC, but as well as Peter mentioned, things like funds of ETFs has been strong. So we're positive on where the ETF business is going and where it's been for First Asset within the CI family.

[Peter William Anderson, President, CEO & Director]

Well, I think we are -- we don't have any other calls. So why don't we wrap it up. But let me just finish off by giving you a couple of sound bites that I hope you've been able to take away from this call. #1 is, we can all acknowledge, it's a challenging environment and a challenging market for the industry and not only in Canada but globally. But I would say that, I see I'm quite encouraged by the improvement that we've seen in our retail business, but don't get me wrong, I mean, we still have ways to go in enhancing the -- our -- sorry and returning our business to positive sale is our #1 priority. I think you see also that our performance is improving. And you're seeing improvement in a number of our core portfolio management teams, whether it's Cambridge or Signature there and others quite very encouraged. And as you know that is a leading indicator and if you see despite being a little softer in Q1, that's totally explainable, 1 and 3-year numbers are better and longer term continue to be very strong. We're launching new products and expect to see those coming out over the next couple of quarters. I am sorry I can't give you any more detail, but we're going to continue to be innovative and continue to launch products that meet the needs of our advisors in different categories and of course our clients.I'm very pleased with the results of Assante & Stonegate. Again in a challenging market they continue to perform very well and that's a testament to the leadership team and the advisors and their teams as well. And we just continue to invest in that business with technology, with products and continue to recruit and look for ways to double the size of that business. So I'm very, very encouraged and I'm pleased with that. And then finally, I would say that our digital platforms, although different for CI, very different, I think us building an independent, integrated platform that serves the needs of investors today and in the future I think is a -- will be an important cornerstone to the growth of our Company. And I'm very, very encouraged by seeing the very short-term results that we've seen with BBS and Virtual and then our newest acquisition WealthBar. They are -- all 3 of those are going to be integral to the growth of our digital strategy, but also in other parts of our distribution including Stonegate and Assante.And then finally, I would say that I'm very pleased with the financial results of our Company. Although again challenging with the volatility that we see in the market, we continue to do what we've always done at CI and that's to focus on the controllables and maintain our financial results and focus on doing what we think is the best for our shareholders. And so, with that, thank you so very much. I'm very sorry again if there were some technical challenges at beginning. But we're all here if you have any other questions for us. And if you have any questions, don't hesitate to send us an email or give us a phone call. So again, thank you very much and we'll chat again soon.

[Operator]

The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.