Company Reports

While we no longer believe that IGM Financial has an economic moat, we have raised our fair value estimate to CAD 42 per share from CAD 40 to account for revised near-term expectations for assets under management, revenue, and profitability. We've become increasingly concerned that a greater-than-expected correction in the equity markets over the next 5-10 years and/or an even more aggressive push by the Big Six banks—Royal Bank of Canada, Toronto-Dominion Bank, Scotiabank, Bank of Montreal, Canadian Imperial Bank of Commerce, and National Bank of Canada—to use price to drive growth and take more share of the Canadian fund market would leave firmwide returns on invested capital well below the weighted average cost of capital in some years during the next decade. This is the case in most years of our bear-case scenario, which includes equity market declines greater than our base-case market corrections in 2026-27 and 2031-32, but no aggressive push by the Big Six—just a continuation of existing competitive pressures.

While IGM Financial has historically generated solid operating margins and held a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate positive flows. Both its asset-management (Mackenzie Investments) and wealth-management (IG Wealth Management) arms have consistently struggled to generate organic growth in assets under management, which has only been modestly positive the past five years for the combined subsidiaries despite meaningful price cuts aimed at making their funds more competitive. To us, this is a sign of the weaker competitive position IGM has relative to the Big Six banks and life insurers in the Canadian market, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm more exposed to the industry's secular headwinds.

While IGM Financial has historically generated solid operating margins and held a decent share of the Canadian mutual fund market, we've been less than impressed by its ability to generate organic AUM growth. Both its asset-management (Mackenzie Investments) and wealth-management (Investors Group Wealth Management) arms have consistently struggled to generate positive flows, with organic growth only modestly positive the past five years for the combined subsidiaries, despite meaningful price cuts aimed at making their funds more competitive. To us, this is a sign of the weaker competitive position IGM has relative to the Big Six banks, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm more exposed to the industry's secular headwinds.

There was little in narrow-moat IGM Financial's first-quarter results that would alter our long-term view of the firm. We are leaving our CAD 38 per share fair value estimate in place. We view the shares as being fairly valued right now.

There was little in narrow-moat IGM Financial's fourth-quarter results that would alter our long-term view of the firm. We are leaving our CAD 38 fair value estimate in place and view the shares as slightly undervalued.

There was little in narrow-moat IGM Financial's recent investor day that would alter our long-term view of the firm. While we expect to keep our CAD 38 per share fair value estimate in place, we have adjusted our Uncertainty Rating for the firm to High from Medium to better align it with the rest of the North American asset managers. For many of the past several years we've had almost all the asset managers tagged with High Uncertainty Ratings, owing to the increased volatility in both the equity and credit markets, and we expect to keep them there until we see signs of more normalized markets. As for IGM, the firm had been more stable than its peers for some time but has fallen more in line with the group the past year, informing our decision to change the uncertainty rating. We currently view IGM's shares as being slightly to modestly undervalued relative to our fair value estimate based on its new uncertainty rating.

While IGM Financial has historically generated solid operating margins and held a decent share of the Canadian mutual fund market, we've been less than impressed by its ability to generate organic AUM growth. Both its asset-management (Mackenzie Investments) and wealth-management (Investors Group Wealth Management) arms have consistently struggled to generate positive flows, with organic growth only moderately positive for both subsidiaries in the past five years, despite meaningful price cuts aimed at making their offerings more competitive. To us, this is a sign of the weaker competitive position IGM has had historically, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm negatively exposed to secular headwinds for the industry.

While there was little in narrow-moat IGM Financial's third-quarter results that would alter our long-term view of the firm, we are reducing our CAD 42 per share fair value estimate to CAD 38 in response to weaker near-term AUM, revenue, and profitability than we had been projecting, as well as our expectation that the firm will continue to face equity and credit market headwinds over the next several quarters. We view the shares as being modestly undervalued relative to our revised fair value estimate.

While IGM Financial has historically generated solid operating margins and hold a decent share of the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth. Both its asset-management (Mackenzie Investments) and wealth-management (Investors Group Wealth Management) arms have consistently struggled to generate positive flows, with organic growth only moderately positive for both subsidiaries the past five years despite meaningful price cuts aimed at making their offerings more competitive. To us, this is a sign of the weaker competitive position IGM has had historically, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm negatively exposed to secular headwinds for the industry.

There was little in narrow-moat IGM Financial's second-quarter results that would alter our long-term view of the firm. We expect to leave our CAD 40 per share fair value estimate in place. We view the shares as being fairly valued right now.

While IGM Financial has historically generated solid operating margins and maintains a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth.

While there was little in narrow-moat IGM Financial's first-quarter results that would alter our long-term view of the firm, we do expect to raise our CAD 42 fair value estimate slightly to account for higher levels of assets under management than we were forecasting for the firm at this point in the cycle. Even so, the share will still only be slightly undervalued relative to our revised fair value estimate.

There was little in narrow-moat IGM Financial's fourth-quarter results that would alter our long-term view of the firm. We are leaving our CAD 42 fair value estimate in place.

While IGM Financial has historically generated solid operating margins and maintains a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth.

While there was little in narrow-moat IGM Financial's third-quarter results that would alter our long-term view of the firm, we expect to lower our fair value estimate to CAD 42 per share from CAD 45 after updating our near-term assumptions about assets under management, revenue, and profitability. The company closed out September 2022 with CAD 208.7 billion in consolidated managed assets, down 2.1% sequentially and 11.6% on a year-over-year basis. The firm also had CAD 29.4 billion in assets under advisement at the end of the third quarter.

While IGM Financial has historically generated solid operating margins and maintains a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth. Both its asset-management (Mackenzie Investments) and wealth-management (Investors Group Wealth Management and Investment Planning Counsel) arms have consistently struggled to generate positive flows, with organic growth only moderately positive for both subsidiaries the past five years despite meaningful price cuts during that time aimed at making their offerings more competitive. To us, this is a sign of the weaker competitive position IGM has had historically, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm negatively exposed to secular headwinds for the industry.

While there was little in narrow-moat IGM Financial's second-quarter results that would alter our long-term view of the firm, we expect to lower our fair value estimate to CAD 45 per share from CAD 48 after updating our near-term assumptions about assets under management, revenue, and profitability. The company closed out June 2022 with CAD 212.8 billion in managed assets, down 10.1% sequentially and 8.8% on a year-over-year basis. The firm also had CAD 29.0 billion in assets under advisement at the end of the second quarter.

While IGM Financial has historically generated solid operating margins and maintains a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth. Both its asset-management (Mackenzie Investments) and wealth-management (Investors Group Wealth Management and Investment Planning Counsel) arms have consistently struggled to generate positive flows, with organic growth only moderately positive for both subsidiaries the past five years despite meaningful price cuts during that time aimed at making their offerings more competitive. To us, this is a sign of the weaker competitive position IGM has had historically, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm negatively exposed to secular headwinds for the industry.

There was little in narrow-moat IGM Financial's first-quarter results that would alter our long-term view of the firm. We are leaving our CAD 53 per share fair value estimate in place. IGM Financial closed out the March quarter with CAD 237.1 billion in managed assets, down 3.3% sequentially but up 7.0% on a year-over-year basis. The firm also had CAD 31.2 billion in assets under advisement at the end of the first quarter. Consolidated net inflows of CAD 2.1 billion during the March quarter were reflective of a 3.4% annualized rate of organic AUM growth, at the upper end of our five-year forecast calling for low-single-digit organic AUM growth on average annually during 2022-26.

While IGM Financial has historically generated solid operating margins and maintains a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth. Both its asset-management (Mackenzie Investments) and wealth-management (Investors Group Wealth Management and Investment Planning Counsel) arms have consistently struggled to generate positive flows, with organic growth only moderately positive for both subsidiaries the past five years despite meaningful price cuts during that time aimed at making their offerings more competitive. To us, this is a sign of the weaker competitive position IGM has had historically, with poor investment performance, higher fees, and a reliance on a closed advisor network leaving the firm negatively exposed to secular headwinds for the industry.