Market Gains and Positive Flows Lift CI Financial’s Q4 AUM

While there was little in narrow-moat CI Financial’s CIX fourth-quarter results that would alter our long-term view of the firm, we expect to increase our fair value estimate slightly to reflect changes in our expectations for AUM, revenue, and profitability in the near to medium term following the release of slightly better-than-expected results from the asset manager for the final quarter of 2022.

CI Financial closed out December with CAD 117.8 billion in core assets under management, or AUM, up 3.1% sequentially but still down 18.4% on a year-over-year basis. The CAD 3.6 billion increase in retail fund AUM during the fourth quarter was driven by market gains (of CAD 2.3 billion) and fund inflows (of CAD 1.3 billion). The company’s core asset-management segment accounted for 31% of total managed assets (of CAD 375.8 billion) and 45% of base management fees during the fourth quarter.

As for the firm’s Canadian wealth management segment, which accounted for 21% of managed assets and 23% of management fees, assets increased 4.7% sequentially but were still down 4.0% year over year. And finally, CI Financial’s U.S. wealth management segment, which accounted for 48% of managed assets and 32% of management fees during the fourth quarter and has acquired CAD 33.1 billion in AUM over the past four calendar quarters, the unit saw its managed assets increase 20.5% sequentially and 19.3% year over year.

Fourth-quarter total revenue for CI Financial increased 0.2% when compared with the prior year’s period, as the acquisitions made during the year offset the negative affect of market losses and retail fund outflows. Full-year revenue growth of 7.6% was slightly better than our 2022 forecast calling for CI Financial’s top line to expand at a mid-single-digit rate. As for profitability, the company’s full-year operating margins (adjusted for restructuring and other charges) of 30.8% were down 990 basis points when compared with 2021.