Competitive Pressures Will Make the Way Forward More Difficult for IGM Financial

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.