Improved Flows and Market Gains Should Lift IGM Financial's AUM, Revenue, and Profitability

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.