IGM Financial Inc

TSX:IGM

Earnings Call Transcript 2022-Q1

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IGM Financial Q1 2022 Analyst Call and Webcast Conference Call. [Operator Instructions] As a reminder, the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Keith Potter, Senior Vice President of IGM Financial. Please go ahead.

[Keith Potter, executive]

Thank you. Good afternoon, everyone, and welcome to IGM Financial's 2022 First Quarter Earnings Call. Joining me on the call today are James O'Sullivan, President and CEO of IGM Financial. We have Damon Murchison, President and CEO of IG Wealth Management; Barry McInerney, President and CEO of Mackenzie Investments; and Luke Gould, Executive Vice President and CFO of IGM Financial.

Before we get started, I'll draw your attention to our cautions concerning forward-looking statements on Slide 3 of the presentation. Slide 4 summarizes non-IFRS financial measures used in this material. I would highlight on Slide 4 that we've added non-IFRS ratios to our non-IFRS financial measures. On Slide 5, we provide a list of documents that are available to the public on our website related to the first quarter results for IGM Financial.

And with that, I'll turn it over to James.

[James O'Sullivan, executive]

All right. Thank you, Keith, and good afternoon, everyone. Before I review our first quarter, I do want to acknowledge the situation in Ukraine. Canada has a strong and lasting connection to Ukraine. The contributions of Ukrainian Canadians to the culture and prosperity of our country cannot be overstated. Our hearts go out to Ukrainian people impacted by this unjust war waged by Russia.

Turning to Slide 7. First quarter earnings were $0.91, an all-time record high and a 7% increase relative to last year. We also achieved the best first quarter net flows in our company's history at $2.5 billion. And we continue to emphasize and deliver outstanding expense control during the first quarter, with operating, support and business development expenses growing only 2.1% relative to Q1 of last year, and we are reducing our full year expense guidance to approximately 3.5% growth from the 5% previously.

Quarter ending AUM&A declined 3.2%, as our best-ever RSP fees and net inflows were more than offset by the declines in both global equity and fixed income markets. From a capital allocation perspective, we launched a normal course issuer bid during the first quarter and repurchased 570,000 shares for $26 million during March. And we used our automatic securities purchase plan to continue through April, repurchasing an additional 600,000 shares for $26 million.

Alongside our first quarter results, we published our 2021 Sustainability Report, and I'll share a few highlights on a coming slide.

Now on March 1, we announced several leadership changes in the organization that I believe deliver strategic continuity, succession and further elevate this organization. Barry McInerney has announced his intention to retire effective June 30, 2022, after over a 35-year career in the industry in Canada and the United States, and nearly 6 years leading Mackenzie through a period of exceptional growth.

Luke Gould, who you have all had the opportunity to get to know very well on these calls and over his 25 years with IGM Financial, will become the President and CEO of Mackenzie effective July 1, 2022. Succeeding Luke is Keith Potter, another very familiar name to you, I'm sure, based on his work as Treasurer and Head of Investor Relations, and prior roles, including Head of Product at IG Wealth. Keith becomes IGM's Chief Financial Officer effective July 1.

Kelly Hepher joins IGM Financial on April 1 in a newly created role of Chief Risk Officer, where she will lead our enterprise risk and corporate sustainability programs as well as administrative responsibility for our internal audit function.

I'm very excited about these appointments and what they mean for IGM Financial. These appointments speak to the depth and quality of the leadership that we have at our companies and the focus that we've been placing on succession planning. I look forward to their contributions as they take on these new challenges.

And so turning to Slide 8. The markets have been very volatile during the first 4 months of the year, driven to a large degree by the war in Ukraine, combined with concerns over inflation and rising interest rates across major global economies. While Canadian equity markets managed to deliver a positive total return during Q1 driven by resource exposure in the index, most global equity markets experienced negative returns during the quarter.

Fixed income markets in aggregate also suffered losses. In fact, the 7% negative return for the FTSE TMX Canada index was the worst quarterly return experienced over the 40-year history of the index, driven by rapidly rising interest rates, coupled with inflation concerns. This outlier event is causing a shift in product demand away from traditional duration products towards floating rate or other low-duration solutions within the investment fund industry.

Turning to Slide 9 on the overall industry net sales. Following an outstanding 2021 for the industry, we've seen a decline in overall investor sentiment during the past couple of months relative to the very high level seen last year. First quarter long-term mutual fund net sales for industry asset manager peers were $7 billion, slightly above average, but down from $18.8 billion during the same period last year, with noticeably limited sales into income-oriented strategies. All that said, as we see volatility in the markets, we believe advisers can use this opportunity to work with our clients to navigate the current environment. This includes conversations on understanding the impact of rising inflation, discussing the importance of a well-constructed investment portfolio and the opportunity to invest money that has otherwise been sitting on the sidelines.

Turning to Slide 10 on IGM's results. Average AUM&A increased 10.5% year-over-year, and net earnings increased 8%.

Slide 11 highlights how IGM's earnings growth was driven by increases across all 3 of our segments: Wealth Management, Asset Management and our Strategic Investments.

Turning to Slide 12. We saw strong net inflows across IG Wealth, IPC and Mackenzie Investments, and you will hear more on the strong fundamentals of these businesses in remarks from Damon, Barry and Luke.

On Slide 13, I'd like to highlight IGM's annual sustainability report released today. We prepare this report for all stakeholders, but also to address the ESG needs of our investors, analysts and ESG community. We are committed to transparent disclosure, and you'll find we include both TCFD and SASB disclosures in our report.

In line with the theme of this year's report, Bettering Lives for Tomorrow, we have forged ahead with our sustainable priorities of building financial confidence; advancing sustainable investing; accelerating diversity, equity and inclusion; and supporting a just transition to a net zero economy. IGM's commitment to ESG and sustainability also continues to receive recognition in the marketplace including IGM's inclusion in Corporate Knights' Global 100 Most Sustainable Companies published earlier this year. The appendix of this presentation contains some additional highlights from the 2021 report, though I'd encourage each of you to take a look at the full report available on our website.

And with that, I will turn the call over to Damon.

[Damon Murchison, executive]

Thank you, James, and good afternoon, everyone. Turning to Slide 15 and IG Wealth Management's first quarter highlights. We ended the quarter with AUA (sic) [ AUM&A ] of $116.3 billion, a decrease of 2.7% during the quarter as a result of financial market declines. $1.5 billion was another record high in terms of net flows for Q1. And net sales into IGM managed products of $1.3 billion was our best Q1 in over 20 years.

We have continued our strong positive momentum in the high net worth and mass affluent segments of the market, where inflows from newly acquired clients over $500,000 increased 41% year-over-year in Q1 2022.

I'll speak to our new product launches on a coming slide. And at IG Wealth Management, we are proud to be recognized as a top employer in this country and for strong results we achieved in the 2022 J.D. Power Investor Satisfaction survey, where we were ranked above each of the big 5 banks' full-service brokerage arms.

Turning to Slide 16. You can see our record high Q1 results and continued strong momentum. We're also pleased with our strong net flows last month. To put April into perspective, March and April is typically a period where we have significant focus on working with our clients on [ top ] planning and optimization. Because of this, only 3 Aprils in the last 15 years have had positive net flows, including both April 2021 and '22. April also marked the 19th consecutive month of positive net flows for IG Wealth.

Turning to Slide 17. In Q1 2022, we achieved an all-time record high gross and net flows of $4 billion and $1.5 billion, respectively. Our net inflows are broken down in more detail on the net flows table where you can see that our $1.3 billion of net sales into IGM product during Q1 increased $556 million year-over-year. We believe we're winning market share today with our trailing 12-month net flows rate reaching 3.6% during Q1.

Turning to Slide 18. While we're growing our share of wallet with our existing clients, this slide highlights how our new client acquisition is really driving our success. As you can see on this slide, in Q1 2022, we continued our strong momentum with gross flows from newly acquired clients increasing 28% on a 1-year basis and 86% over a 5-year basis.

On the right-hand side, you can see the continued success we're having in terms of high net worth and mass affluent client acquisition quarter-after-quarter. The increase in new client acquisition continues to be a significant contributor to our overall gross net flows momentum at IG Wealth.

Turning to Slide 19. We continue to showcase our momentum in accelerating adviser productivity. Both our newer advisers and more experienced adviser practices are demonstrating continued growth driven by the hard work of the advisers and the initiatives we have undertaken to further expand their capabilities and business potential, which you can see on the right-hand portion of this slide.

Turning to Slide 20. During April, we launched, in collaboration with Mackenzie Investments and BlackRock, 2 new suites of products that aim to provide clients with comprehensive diversification for their U.S. dollar-based investments, including an innovative first-of-its-kind solution to help simplify the U.S. tax reporting process for Canadian residents who pay U.S. taxes, which is often complicated and costly. These launches further elevate the product shelf we offer to our high net worth clients in Canada.

Lastly, turning to Slide 21. I'd like to take a few moments to highlight some of the recent recognitions IG Wealth Management has achieved. In terms of advisor engagement, in the most recent investment executive dealer report card, we improved in 26 of the 31 categories, and were the only dealer to improve year-over-year. With respect to employee engagement, we were recently named a top 100 employer across Canada and in Manitoba for our strong employee offering and value proposition. And in terms of client satisfaction, J.D. Power just published its 2022 Canada Full-Service Investor Satisfaction Study, and I'm pleased to announce that IG Wealth has improved to sixth in their overall customer satisfaction index, ahead of both the industry average and each of the full-service brokerage arms of the 5 big banks. We believe this further demonstrates our attractive client value proposition. It is very exciting for us to have a high level of adviser, employee and client engagement driving our underlying business results.

I'd now like to turn the call over to Barry McInerney.

[Barry McInerney, executive]

Thank you very much, Damon, and good afternoon, everyone.

I'll take us to Slide 23 to review Mackenzie's Q1 results. Total AUM of $205.5 billion as of March 31 was down 2.3% during the quarter due to negative investment returns of 5.1%, partially offset by strong positive net sales of $873 million. First quarter investment fund net sales of $1.3 billion were the second best on record, and Q1 marked our 22nd consecutive quarter of positive retail investment fund net sales.

This quarter, we launched several new funds with a focus on sustainable investing and alternative solutions, and I'll speak more to the progress we've made in the sustainable investing arena in a moment. I'll also discuss the Q1 operating environment for the China asset management industry on the coming slide as well as an important development for the industry that is very positive for mid- to long-term growth. Finally, Northleaf continued to see strong fundraising with $1.1 billion of new commitments during the first quarter.

Turning to Slide 24, where we outline a trended history of Mackenzie's net flows. As mentioned on our last call and reiterated by James today, 2021 was an extraordinary year for net sales in the Canadian investment fund industry. The industry environment in 2022 is presenting shifting challenges and opportunities with overall industry flows resetting and a mix of flows that is evolving noticeably. We continue to adapt and pivot where necessary to position Mackenzie to compete and win market share and to deliver strong near- and long-term growth.

The chart in the top left corner compares our Q1 adjusted investment fund net sales of $625 million to prior periods. Outside of Q1 of last year, $625 million represents the best Q1 in over 20 years. And I note that this figure excludes $675 million of net sales resulting from fund allocation changes at Wealthsimple during the first quarter. And Mackenzie reported investment fund net redemptions of $49 million for the month of April, in line with what we're seeing in the industry for the month.

Slide 25 summarizes Mackenzie's Q1 2022 operating results. Retail mutual fund net flows of $592 million were the second best in over 20 years, down relative to last year but up $412 million compared to Q1 2020. Institutional investment fund net sales were positive $880 million, which includes contributions from Wealthsimple. Mackenzie continues to gain market share as demonstrated by our 6.1% long-term investment fund net sales rate as at March 31. And 52% of Mackenzie's AUM rated by Morningstar were 4- or 5-star funds, and 15 of our top 20 mutual funds were rated 4, 5 stars for Series F.

Slide 26 shows our retail mutual fund AUM, investment performance and net sales across our investment boutiques. Our teams continue to deliver strong relative performance as measured by Morningstar, and our retail sales continue to be broad-based and diversified across investment strategies. Year-to-date 2022, we have seen value strategies generally outperform growth strategies, and we see this lift in Cundill's short-term performance.

On the fixed income side, the net sales story has 2 distinct elements. Duration products and traditional fixed income categories experienced net redemptions across the industry during Q1, and Mackenzie experienced its share. Offsetting this has been strength in low-duration fixed income strategies such as Mackenzie's floating rate mutual fund and ETF solutions, and we've observed continued sales momentum during April in these solutions and others on their shelf that are designed to perform well through a period of rising interest rates.

Slide 27 shows the growth catalysts I've spoken to numerous times over the past 6 years or so at Mackenzie. I'm so very proud of the progress we've made across all these growth areas and thank the individuals and teams responsible for positioning Mackenzie exceptionally well to execute against each of these opportunities well into the future.

With this being my last time joining this call, I'd like to take an opportunity to highlight one element that has been particularly personal -- of personal interest to me, sustainable investing. This is an area of great importance and impact to our organization and the industry overall. Mackenzie has been positioned as a leader in sustainable investing in Canada, with the launch of over a dozen products focused on this space over the past 5 years, and we are set to publish our inaugural sustainable investing report later this month.

In terms of AUM, Mackenzie now manages $4.5 billion with specific sustainable investing objectives, positioning us in the top 4 within Canada with approximately 8% market share. In addition, we've made significant progress building capabilities to better integrate climate and energy transition risks into our investment process across all of our boutiques.

Continuing on Slide 28. The overall Chinese mutual fund industry AUM was relatively stable, down only 1.8% during the first quarter as negative investment returns were largely offset by continued positive net sales of CNY 817 billion. Despite equity market declines of approximately 14% during Q1, net sales into long-term funds were still over CNY 350 billion. Money market funds also attracted strong net sales during the quarter. And overall, industry money market fund AUM increased 5.5%, while long-term funds declined 6.2%. China AMC continues to rank second overall in terms of long-term mutual fund assets under management in China and, like Mackenzie, has a diversified suite of investment solutions and benefits from broad access to distribution.

Turning to Slide 29. While on the topic of China, I wanted to focus in on the third pillar of China's pension system, private pensions. On April 21, China State Council released a policy document outlining its framework to further develop China's pension system with the introduction of private pensions as a third pillar, supplementing the existing 2 pillars focused on government and corporate pension plans. We are encouraged by this important step in the development of China's third pillar. As a top asset manager in China with a strong track record of innovation and deep experience managing pension assets, China AMC is very well positioned to execute against the opportunity in the coming years.

And just to give you a sense for the size of this opportunity under this new private pension system, approximately 1 billion individuals -- 1 billion individuals will become eligible to make voluntary annual contributions of up to CNY 12,000 into qualifying pension accounts. The rollout and adoption of the new program will take some time, but the size of the overall market opportunity is significant, and we are excited to participate in it by way of our investment in China AMC.

Lastly, on Slide 30, we're highlighting Northleaf Capital Partners' $20.3 billion in assets under management and their strong growth across private equity, private credit and infrastructure asset classes. And in Q1 of this year, Northleaf grew AUM by 4%, driven by strong fundraising of $1.1 billion during the quarter.

I'll now turn the call over to Luke.

[Luke Gould, executive]

Great. Thanks, Barry. Good afternoon, everyone. On Page 32, you can see our AUM&A. The chart on the left does a good job of illustrating where we are at the end of April. During Q1, AUM&A was down 3.3% due to negative market returns of 4.6%, and this was offset by record high net flows of $2.5 billion, reviewed earlier by James.

During April, assets were down another 4% to $257.4 billion. We remain near these levels today. And think towards Q2, you can see we have AUM&A slightly lower than the average balance in Q1 and slightly above the average balance in Q2 of last year.

Moving to Page 33. I have a couple of comments, and you can see on this slide that it presents our quarterly EBIT in millions of dollars on the left and as a percent of AUM&A on the right.

On the left, I direct you to the second stack from the top where you can see that our share of associates' earnings and net investment income was $46.4 million, down $8 million from last quarter. As you would have seen, included in this line was $7 million, reflecting mark-to-market of seed capital relating to market declines. I'd also note $2.5 million of this was included within China AMC's results and reflects our proportionate share of their seed capital mark-to-market.

On the right, you can see our margins. The key point I'd make here is to remind everyone that we have a number of seasonal items in Q1 of every year that has a depressing impact on earnings and are very hard to model. I'm going to highlight a few of them here, and I'm going to speak a bit more to them in detail in the coming slides.

First, our expenses are seasonally high in Q1. You can see on the chart on the right, our unit costs of 44 basis points are down from 47 basis points in Q1 of last year, but of course, because of the seasonality, are up relative to Q4.

Second, we have fewer days upon which we charge our revenues in Q1 than in other quarters. However, our asset-based compensation to distributors and advisers is based upon 1 quarter of a year applied to an annual rate as opposed to our revenues, which are based upon 90 days divided by 365 days applied to an annual rate.

And lastly, our insurance sales at IG are seasonal, and they're down $2 million from Q4. Q4 is our peak seasonal high period for insurance sales. And so we do typically have this -- well, we always have this reduction coming into Q1.

I'm going to go to Page 34, where you can see our consolidated earnings statement for IGM. At the bottom, you can see, as reviewed by James, we had a record high Q1 earnings of $0.91, up 7% from last year. Building on the comments from last slide, you can see we've highlighted in point 1 that the seed capital mark-to-market was $6.6 million as a result of financial market declines. And as highlighted in the last slide, you can see the $2.3 million of this reflected our proportionate share of China AMC's seed capital mark-to-market.

In point 2, we are very focused on expense management during the quarter. Our ops and support and business development expenses were up 2% and were $9 million below our previous guidance. You can see here in this point, we are revising our full year expense guidance to a 3.5% increase from 2021, and this is a decline of approximately $15 million to $20 million from our previous guidance. Net expenses would be up to 5% this year.

And lastly, in point 3, with our increase in year-over-year earnings, our dividend payout rate on a last 12-month earnings basis has declined to 66% of cash earnings. And as described previously, we would consider a dividend increase at 60% of adjusted cash earnings. So while the payout rate continues to reduce, we are -- as we've strengthened our earnings, we're not quite at that 60% payout rate yet where we'd consider a dividend increase.

Turning to Page 35, you can see a summary of IG Wealth's AUA and the key revenue and expense margins. I'd highlight that on the top right, you can see our advisory fee revenue rate was 101.9 basis points in the quarter. We've highlighted in the gray italicized numbers right above that we made a reclassification this quarter of net interest income that we earn on client cash deposits to be included in this advisory fee line given its character -- the fact that it is driven as a percentage of AUA. And this amount was previously included with the other financial planning revenue line and previously was trivial.

Retroactive for this, you can see the fee rate decline by 0.5 basis points. This is right in line with our earlier guidance, and the 0.5 basis point decline reflects our continued success in development of high net worth client relationships, as reviewed earlier by Damon.

I'd also highlight that our asset-based compensation rate was 49.2 basis points in the quarter. You can see this was a 0.5 basis point increase, and this was as a result of continuing maturing of units initially sold subject to a deferred sales charge. I'd remind everyone that at 7-year maturity, the asset-based compensation on these units doubles. I'd also remind that we discontinued sale of these products 6 years ago, so this trend will continue right until Q4 of 2023. And following that, all the DSC will have fully matured and this trend will discontinue.

Most importantly on this slide, I want to highlight and remind that our asset-based comp is established and paid on a different basis than our revenues. The square rectangle box shows the rate if one were to annualize our asset-based comp based upon the number of days in the period and using average -- daily average assets in the denominator. I'd remind that asset-based comp is established monthly by applying a 1/12 amount to an annual rate each month and then applying this to a simple average AUA balance -- and the simple average is the open balance at the beginning of the month and the balance at the end of the month.

You can see in the bottom left, we've actually depicted what the simple monthly average AUA is in every quarter, and you can see it was $116.8 billion this quarter. And if you go up that chart on the left, you can see that compares to $116.3 billion when one calculates a daily average balance.

I know it seems odd to be spending so much time on these technical amounts, but I would highlight back to the chart on the right the different application of rates being 1/12 per month or 3/12 per quarter in the case of asset-based comp versus our revenues being applied at the rate of 90 days over 365 for the quarter, as well as the different basis upon which we calculate an average has resulted in a difference of 49.2 basis points in reality that we paid versus 50.1 basis points if one were to use the same basis upon which we earn our revenues. This 0.9 basis point difference is worth about $3 million in a quarter. So it seems like a small amount, these technicalities, but it can actually add to a large number if they aren't modeled properly.

I would also give guidance on this rate that for the rest of the year, you should expect it to gradually increase as [ DST ] units continue to mature, and we expect the average rate to be about 49.5 basis points through the full year.

Moving to Page 36. IG's earnings were up 6.4% year-over-year. As mentioned earlier, comparisons to Q4 are less relevant due to seasonal items. The one point we'd make here is just to highlight our focus on expense management. Expenses were down $5.6 million relative to Q1 of 2021 at IG. I'd also note, if you look at the net investment income and other line, that we do have seed capital mark-to-market declines in each and every one of our segments, including IG Wealth.

Moving to Page 37. You can see Mackenzie's AUM by client and product type as well as our net revenue rate. I just have 2 quick comments on this slide. On the right, focusing on the yellow, you can see the net management fee for third party clients is 53.2 basis points. And much like our discussion at IG Wealth, it's impacted by the same seasonality in asset-based comp that IG Wealth was. When you exclude the seasonality and how we pay asset-based compensation, the rate was actually 54.1 basis points, down slightly from Q4. And that slight decline reflects a change in the composition towards the Wealthsimple ETFs, which were sold during the period.

I'd also note that if you look at the bottom left, you can see the share of the wealth management AUM that Mackenzie is advising to has increased from 69.9% to 71.9%. And this is the result of an award of business by IG Wealth to Mackenzie in the Canadian equity space within the iProfile program. And that award was $2.5 billion.

Moving to Page 38. You can see Mackenzie's net earnings were up 8.6% from last year. And you can see the only item that we've called out here is the seed capital mark-to-market of $2.5 million.

On Page 39, you can see China AMC's results. On the left, total AUM of CNY 1.6 trillion is up 4% from last year and down 4% from December. At the bottom, you can see in the bottom stack long-term funds were up 22% from last year and down 7% in the quarter. As reviewed by Barry, in spite of the financial market volatility, industry net sales were robust, and China AMC did gain market share during the period. On the right, you can see IGM's share of China AMC's earnings were $15.8 million when you exclude the $2.3 million seed capital mark-to-market, and this was a healthy 25% increase from last year.

On Page 40, you can see Wealthsimple's quarterly metrics. On the left, in spite of financial market declines, we saw Wealthsimple's AUA increase by 5.4% in the quarter due to continued strong client acquisition. In the middle, you can see that Wealthsimple continues to deliver very strong growth with its number of clients at 1.665 million at the end of March, an increase of 8% in the quarter, an increase of 62% in the last 12 months. And this growth in clientele was right in line with our plans for the business.

Moving to Page 41. In the top right, I would remind for those who have viewed our results that we recorded a 23% diluted stake in Wealthsimple at fair value through other comprehensive income. And this quarter, we did adjust our valuation downwards by 20%. This 20% revaluation is consistent with the decline in valuation multiples for publicly traded fintech providers.

In the table at the bottom, I'd remind you of the upcoming purchase of an additional 13.9% stake in China Asset Management from our parent company, for $1.15 billion. And you can see along with that transaction, we are selling part of our Great-West Lifeco stake to them. And this deal is on track to close likely in early Q3. I'd also highlight the right column that these strategic investments have a conservative value of $4.6 billion.

And lastly, on Page 42, you can see our typical disclosure around some of the parts of IGM. At the April 29 closing price of $40.71, we present here an implied PE multiple for IG Wealth and Mackenzie based upon expected 2022 earnings [ when we went to press, ] and this implied multiple, 6.1x, which compares to PE multiples of global wealth managers and asset managers at much higher levels.

I'd also highlight the second column from the right, unallocated capital and other, where you can see we have excess capital of $805 million or around $230 million following the pro forma for the upcoming purchase of China AMC shares.

I do want to remark that we have a normal course issuer bid outstanding of 6 million shares, as James reviewed earlier. And we believe this quarter actually produced very fundamental strong results. And I just want to let everybody know that we're very excited to come out of blackout on Monday and have the opportunity to repurchase our shares at what we believe is a very attractive price based upon where they're trading. That concludes my comments. I'll turn it over for questions.

[Operator]

[Operator Instructions] The first question comes from Geoff Kwan with RBC Capital Markets.

[Geoffrey Kwan, analyst]

James, my first question with you, I mean, Luke kind of talked about it at the end on the share buybacks and coming out of the blackout period. But just was wondering, like with the pullback in equity markets, kind of impacted how you think about capital allocation on the share buybacks -- it sounds like you're going to be active, but has it had you thinking about being more active than usual on the share buyback as opposed to M&A? And then similarly, on the M&A side, has the market decline impacted kind of the acquisition pipeline and asking prices?

[James O'Sullivan, executive]

Sure. Geoff, we are repurchasing approximately 30,000 shares a day as we speak, which does not sound like a lot, but it's actually -- annualize that, it's 8% of our float, if you exclude positions held by Power Corp and Great-West Life in IGM. So I think there is very much an opportunity for us to increase that if weakness in markets persist. And so that is something we will be considering to be sure.

On M&A, what I'd say is I think I shared with you, Geoff, a couple of months ago at a conference of yours that I had never seen a bigger gap or spread between public company valuations and private market valuations. And typically, those gaps don't persist, at least they don't persist at the levels I've been witnessing them. And of course, public company valuations have only gone down from there. And so I think there remains a gap. I'm still waiting to see evidence of en bloc or M&A values coming down meaningfully.

But I think that is a possibility. I think it's very much a possibility in these very volatile markets that we're going to see more attractive M&A values. And if we do, then I'd refer you to our 2 kind of strategic questions that we've laid out over the next 3 to 5 years. It's our full potential in high net worth and ultra high net worth in Canada and how will we go about achieving it. And secondly, in asset management, how do we position Mackenzie in what is truly a global industry.

So I certainly think there's some room for our NCIB to increase. As I say, at current levels, it's going to mop up 8% of the float per year. And I'm hopeful that we're going to see en bloc values decline, and that, that might create an opportunity for us to do what I said I think good management team should do, which is be disciplined at the top of markets and be opportunistic at the bottom of markets.

[Geoffrey Kwan, analyst]

My second question was for Barry and also for Luke. Barry, just with your upcoming retirement, when you kind of take a look back, I mean do you feel like you've accomplished everything you wanted to do when you joined IGM? Or are there some things that you still want to see done and maybe Luke can carry on that baton?

And then Luke, I don't know if it's still a bit early, but are there things that you'd like to do to sustain the momentum at Mackenzie?

[Barry McInerney, executive]

Well, I guess I'll start. Thanks, Geoff. That's a very nice question. Yes. I'm certainly, in short, feeling really good about where Mackenzie is right now and for Luke, a really terrific Mackenzie leadership team to take the baton and take the firm to new heights.

I mentioned if you had a chance to listen into our Annual Shareholders Meeting earlier today, we worked hard collectively the last 6 years to continue to push hard on the brand and the investment talent. Boy, we brought in so many new teams across the spectrum, particularly in the areas of, as you know, sustainability and alternatives, which are fast growing. And also these growth catalysts that we all lean in on, the 5 of them that I mentioned earlier, they work really well in tandem with the current core. And we would characterize the growth catalysts as the future cores. So they both work well together in terms of building really good portfolios we think, for advisers and investors. So I think really it is a dynamic industry, though, right? So I have full confidence that Luke and the team -- as I did, taking over from Jeff Carney, and as Jeff did, that we pivot and adapt as the environment changes.

But if you look at what we've got right now at Mackenzie, the breadth of the investment capabilities and the brand and the distribution prowess and the fact that we've got, not just market share gains across the traditional asset classes, but participating in the fastest-growing asset class in the world, being private markets via Northleaf and then participating in the, by far, fastest-growing asset management and retirement market in the world in China through China AMC, that's a pretty good launch pad. I would say we all would like to do more during our tenure, but duty calls for me with my family and other demands on my time.

So I'm feeling really good where we are today. Rest assured, though, it's a dynamic industry. And Luke's got a pretty dynamic vision himself. So I'll pass it to Luke for a few comments. Thanks, Geoff.

[Luke Gould, executive]

Great. Thanks, Barry. And thanks a lot for the question, Geoff. I appreciate it. I'd just like to maybe use the question to celebrate Barry a little bit. I've been referring to what I call Barry 6 and they're the 6 things that Mackenzie did under Barry's leadership -- Barry's 6-year leadership. First, we tripled our AUM. We doubled our earnings. We consistently grew market share in Canadian retail. We diversified our distribution channels. We continually launched innovative products in the relevant categories, and we enhanced our adviser and employee engagement. So those are Barry's 6. My mantra has been and it's going to continue to be that we want to do all of those things again -- every single one of them over the next 5 or 6 years, just like we did under Barry's leadership.

And right now, I'd say I'm very fortunate that we have this foundation and the right strategy that we believe we can accomplish each and every one of those 6 things as we look forward into the next 5-year period. So that's what my story is, is really one about continuity and momentum and really continuing the legacy that Barry has been building for this firm.

[Operator]

The next question comes from Scott Chan with Canaccord Genuity.

[Scott Chan, analyst]

Barry, maybe switching to Northleaf, which had a very positive quarter, mainly driven by the $1.1 billion in net inflows. You kind of talked about the product launches or the impending product launches for private equity, infrastructure and private equity. Is there a target from a flow perspective that you can provide us that you see over the next 12, 18 months? Is that visibility there within that complex?

[Barry McInerney, executive]

Yes. So first of all, you can see the growth, no surprise that the growth trajectory of Northleaf since our investment and before our investment. And clearly, those -- vast majority continues to be in the institutional space because they have such a strong offering across private credit and private equity infrastructure and with existing clients re-upping and then new clients coming in. And as you know, they're marketing now institutionally outside of Canada into U.S. and Europe, and we're helping on the China side.

The retail democratization, it really is just an incredible coiled spring. It takes time, as you've heard me before, in terms of education. And -- but we're starting to see the flows. The private credit side, the industry took a little bit of a step back temporarily just because of a couple of industry debacles, I guess. But the quality of [indiscernible] Northleaf is so impressive.

So the private credit is starting to take hold. Infrastructure, actually right now, probably has -- even though it's been available a short period of time, has had more sales than private credit. It's just a terrific asset class, new to loan advisers. And as you know, it gives you good long-term returns, income, inflationary-sensitive as well. And then the private equity, as you've heard from me, that will be coming out this quarter, actually Q2.

So I think it's been a good year start of getting all the products ready to the launch -- great partnership with Northleaf, the pedigree is just well received by the advisers. It has taken us our time to educate advisers, sell it. Here's how it improves a portfolio. So we're feeling pretty good. We didn't -- we don't really have a target to be honest with you, because we want to take a year or 2 to get all the products launched. Again, at the end of this quarter, we'll have all the products launched in terms of the traditional 3 offerings at Northleaf -- but more to come, by the way, and some other really neat innovative products under Luke's leadership.

And as I've mentioned, I think what you'll see now is starting to see after -- it's been a year now of good groundwork, foundational work, you'll start to see the acceleration of those sales, particularly now that our wholesalers at Mackenzie in partnership with Northleaf can go out with all 3 of private equity private credit infrastructure and have that solutions type discussion with advisers to see where they want to add. And they may already have exposure in some areas and therefore we can complement it with other areas.

So not a specific answer to your question. It was a great question. I think we'll probably give you more guidance -- Luke will probably in the coming quarters and some targets. We wanted to get this thing all get out there and it will be totally out there now by the end of this quarter, and you'll start to see some good -- really good flows. And it's good for advisers and Canadians because it's been so good for pension plans for so many years around the world.

[Scott Chan, analyst]

Great. And speaking of institutional, Barry, you called out Q1 net inflows of $880 million, which is probably one of the strongest quarters I've seen. And certainly, there's been headwinds in the space for all asset managers. So maybe you can describe, was it one large mandate? Was it China? How did that come together? And what's the pipeline on that side?

[Barry McInerney, executive]

Yes, please. Yes, as you know, I'm an old institutional guy years ago, so this is always one of my favorite topics. So first of all, just to answer your question specifically, the Wealthsimple partnership, it continues to really expand. And so they represent the majority of the institutional flows for us -- because we classify them as institutional. We work with them as an institutional investor because we work with their CIO and their team. So a majority of that was from Wealthsimple. And our Wealthsimple -- the monies that we manage for Wealthsimple, either they investing in our ETFs which they are now doing and the 4 ETFs that we've manufactured for them, we're approaching $2 billion in AUM for Wealthsimple. And they're growing very fast. It comes in every day, which is very nice.

On the pure institutional side, pension plans, endowments and foundations, sovereign wealth funds -- I would say I've never been more excited at Mackenzie in terms of our pipeline going forward. Now let me conditionalize that a little bit. My experience in institutional as a money manager, [ trying ] institutional mandates is that you have to have continuous opportunities and inflows because you're going to naturally lose some mandate through rebalancing by the plan sponsor -- like we lost one a couple of quarters ago because the pension plan is derisking, doing a lot LDI investing, and we had equities. So they liked our performance, but they -- so you're always going to have that natural churn with institutional.

And when COVID hit, we actually kept our relationships with the retail advisers almost the same, virtually. Not true for the institutional consultants. They were more challenging -- [ you probably heard from the ] industry of having that communication probably almost a year or so during COVID. And they have their own -- not to be critical, just saying, we noticed we couldn't get access to them like we would normally do. Because of that, that kind of natural pipeline started to pull back a bit for a year to 18 months, and therefore, you've been seeing some net outflows, institutional, for Mackenzie.

That will stop going forward. The pipeline is very strong. We might have a big win this quarter, Q2 -- if not, it'll be early Q3. And then you'll see it come through again. So it's been several quarters you've seen of outflows except for obviously Q1 were Wealthsimple was a nice, nice pickup. And that continues. But I expect that you'll see some really nice -- they're lumpy, right? Ins and outs. But some nice lumpy wins coming in on a regular basis going forward. The pipeline has been refreshed. It's global. It's around the world. A lot of our quant team, terrific quant team in Boston, a lot of it is Greenchip, sustainable environmental fund, which now is of high interest, as you know, not just retail, but now institutional for obvious reasons. So it's exciting. But we did have to take time to, I would say, restock the pipeline, and we've done that now. And so things should be quite positive going forward.

[Scott Chan, analyst]

That's very helpful. Congratulations again. Lastly, James, you've kind of talked about the M&A strategy for the last several quarters, high net worth and ultra high net worth. You kind of talked about your leverage and kind of potentially excess capital moving up that leverage to 2x plus. So when we kind of think of the strategy, are you looking to like buy several like family offices or investment counselors and consolidate it? And how do you think about that? Or how should we think about that in terms of strategy within IG or Mackenzie or both?

[James O'Sullivan, executive]

Yes. Good question. Look, our first priority, to be sure, is organic growth in IG Wealth and IPC, and we continue to invest in those businesses, not just in terms of technology and process, but more importantly, in terms of recruiting, and bringing advisers to the organization and associated assets as well. And that's very true at IG Wealth, and it's very true at IPC. And so we have a very positive view of the future of both IG Wealth and IPC. And each of them, as we speak, are penetrating the high net worth channel, and they will forever have our full support in doing so.

Having said that, we do think there might very well be acquisition opportunities out there. And I think it will come as no surprise to you to hear that the Canadian market is a mature market. It's a market that -- where acquisition opportunities are relatively scarce. And so there's not going to be a lot of properties out there. And so I think we're going to have to be nimble, and we're going to have to be open-minded. It could be a chunky acquisition. It could be a few or more smaller acquisitions.

So look, I'm approaching this very, very much with an open mind. And as I said in an earlier question, we have been in the traffic. And as I said, I have found the gap between public market values and private market values to be quite wide, one of the widest I've seen in my career. And if en bloc values or M&A values come down, I -- we will view that as an opportunity. But look, this is one where we're going to have to be patient because it's Canada, and there's not a lot left to buy.

[Operator]

[Operator Instructions] The next question comes from Rasib Bhanji with TD Securities.

[Rasib Bhanji, analyst]

If I could just start off with China AMC. I had a couple of questions over there. One, could you speak to the timing of the private pension program in China for the pilot? And if you have more insights, when could we potentially expect a full rollout of the program.

[Barry McInerney, executive]

It's Barry. Thank you. I'll start, and Luke may have some comments as well. We expect -- as normally conducted with these big policy decisions in China, they're going to do a pilot project for 12 months. And so that will be rolled out in some major urban centers in China and just test the interest and pickup in technology and the offerings, et cetera.

So this is a -- so I would -- what you'll see probably after a year, then it would be expected if things as expected in terms of the pilot, it will be in full execution mode. The reason we find this so exciting for China AMC, and we already mentioned it, is the fact that the -- we have been waiting for this third pillar for quite some time. We knew it's going to happen and now it's here. And this is a significant opportunity.

It will take time. If you think about our RSPs a decade ago, it takes time for everyone to be familiar with tax-deferred vehicle and how to use it. But you could support -- you could argue that it would be -- the pickup is going to be quicker in China than in Canada, a, because the Chinese government is going to be fully behind it. They are incented, obviously, with the 3 pillars now to get their aging demographics, taken care of during retirement. And the fact that the average age of the Chinese versus when we had our RSPs rolled out in Canada, I mean it's a vastly different rate. So 12 months of pilot to get things working.

China AMC, by the way, already launched a couple of years ago, a full array of target date and target risk products just to get them ready, their design and their offering through institutional retail. Because that has been -- potentially could be some of the preferred investment strategies for this third pillar.

So more on it in future calls. And obviously, we'll keep you apprised and Luke and James and everybody else as to what we hear on the ground on the pickup and future projections, but that's the official 12-month rollout that will occur, and then we'll give you updates thereafter.

[Rasib Bhanji, analyst]

Makes sense. And just my second question on China AMC. The earnings this quarter, so excluding the seed capital losses of $15.8 million, looks like versus the $21 million you recorded last quarter, it looks like a more sizable drop than the drop in the mutual fund AUM number. Just wondering, was there anything onetime in nature over there? And I guess -- how much operating leverage would the business have to higher AUM levels from this point on?

[Luke Gould, executive]

Yes, I'll take that one. There do tend to be some seasonal fees within the fourth quarter, but substantially, you should look at this as being in line with the long-term fund assets. That's the biggest driver. And so the total assets include things like money market fund in institutional, they're lower fee. The biggest driver of the earnings is the long-term funds. And so when you look at 25% year-over-year on earnings compared to 22% year-over-year on long-term funds, that's kind of the relationship you should expect.

[Rasib Bhanji, analyst]

Got you. That makes sense. And just my last question on Greenchip. So fund performance is really strong over there. Flows were noticeably lower this quarter. Just wondering, is this a reflection of more competition in the sustainable fund category? Or is this more of an industry-wide trend that happened in Q1?

[Barry McInerney, executive]

Thank you. The sustainable flows in Canadian retail continue to be very strong year-over-year. Obviously, the flows are down overall, as you know, this year versus last year at the industry level. So relatively speaking, the interest remains relatively high.

The -- if you look at our Greenchip environmental fund, you're right, 5 star, 99% top performance since inception. Exceptional. It's just exceptional strategy, exceptional team and interesting enough, they deploy a value approach, even though it's a growth industry. So that's probably another high interest of advisers. So we -- it was down year-over-year simply because it was new last year, right, brand new last year. We saw other mutual funds across the industry that were kind of brand new and novel, get exceptional flows. We certainly got exceptional flows last year.

This year, right now, overall, it's our -- still our #1 seller, net sales into the Greenchip environmental mutual funds. So selling very well for us right now.

And we would say that there's more competition. Greenchip has been doing this for over 15 years. That's all they do, environmental investing, globally. So they have a significant competitive advantage over any new launches that have occurred and the advisers recognize that, and they're capturing a large market share in that thematic environmental area. There's been a broadening of ESG offerings and broader sustainable investing offerings across Canada, but that environmental thematic area, which is a real catalyst probably for years to come, Greenchip is dominating it. So we're very, very pleased with that. And I think you should expect more flows. And by the way, it's not just from a sort of a offering to clients because of their ESG interest, it's just a very -- also a very powerful investment thesis to invest in publicly traded global companies that are principally focused on -- in the areas of new energy sources.

And so if I can put a little plug in also, we have very strong resources team of the current energy sources. So interest in both are occurring because the transition, as we know, is going to take time. And so -- and as you know, a lot of the new energy sources are powered by the current energy sources. So you know all that. So we're quite blessed to have both actually, but specifically, the decline in Greenchip year-over-year, I would -- no worries at all. That was expected because it was newness last year and it's just powering ahead, and it will for quarters to come.

[Operator]

The next question comes from Jaeme Gloyn with National Bank Financial.

[Jaeme Gloyn, analyst]

Yes. Two questions. First one on the seed capital losses given still some market erosion here into the second quarter. Is the likelihood that we should expect to see some more unrealized losses going through in Q2? Or what's -- how should we look at that going forward?

[Luke Gould, executive]

Yes. You definitely should, Jaeme. We've got about $130 million of seed capital at IGM, and you can expect it's substantively largely equities. Also, we do have some infrastructure private credit, but you should expect to see the seed capital move with markets as it did in Q1.

And I'd say the same for China AMC, a large part of the seed capital is our proportionate share of their reductions. So as markets move, you can expect those type of mark-to-markets every quarter.

[Jaeme Gloyn, analyst]

Okay. Good to clarify. And then the second one, more strategic in nature around the Primerica relationship, probably still early days here, but Wondering if there's anything that you can highlight as you're building out that exclusive relationship?

[Barry McInerney, executive]

Sure. It's Barry. Again, as we expressed last quarter, really excited by that, and still work in progress and getting everything set up in terms of the new funds and the systems and the plumbing and the marketing materials and the rollout and -- but we'll give you more information on that probably next quarter. But it will -- things are progressing really well. We're excited by it. Primerica is growing very nicely, too. So -- and we already at Mackenzie had about $1 billion around -- they use about $1 billion of our mutual funds already. So we know them well. And so to be added on as 1 of 2 managers -- AGF will be the second manager -- for this new program with the way that they're growing is really exciting.

So early days. We'll give you more updates on that. But things are progressing well in terms of the getting everything in place for the launch.

[Operator]

This concludes the question-and-answer session. I would like to turn the conference back over to Keith Potter for any closing remarks.

[Keith Potter, executive]

Thank you, and thank you for everyone joining us on this Friday afternoon. Hope you have a great weekend. And with that, we will end today's call.

[Operator]

This concludes the conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.