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Edited Transcript of AGF.B.TO earnings conference call or presentation 25-Sep-19 3:00pm GMT

Q3 2019 AGF Management Ltd Earnings Call

TORONTO Sep 26, 2019 (Thomson StreetEvents) -- Edited Transcript of AGF Management Ltd earnings conference call or presentation Wednesday, September 25, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adrian Basaraba

AGF Management Limited - Senior VP & CFO

* Kevin Andrew McCreadie

AGF Management Limited - CEO, CIO & Director

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Conference Call Participants

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* Gary Ho

Desjardins Securities Inc., Research Division - Analyst

* Graham Ryding

TD Securities Equity Research - Research Analyst of Financial Services

* Phil Hardie

Scotiabank Global Banking and Markets, Research Division - Director, Diversified Financials and Analyst

* Tom MacKinnon

BMO Capital Markets Equity Research - MD & Analyst

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Presentation

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Operator [1]

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Welcome to the Q3 2019 AGF Management Limited Earnings Conference Call. My name is John, and I'll be your operator for today's call. (Operator Instructions) Please note, the conference is being recorded.

And now I'll turn the call over to Adrian Basaraba.

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [2]

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Thank you, operator, and good morning, everyone. I'm Adrian Basaraba, Senior Vice President and Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the third quarter of fiscal 2019. Slides supporting today's call and webcast can be found in the Investor Relation section of agf.com. Also speaking on the call today will be Kevin McCreadie, Chief Executive Officer and Chief Investment Officer. For the question-and-answer period with investment analysts following the presentation, Judy Goldring, President and Chief Administration Officer, will also be available to address questions.

Turning to Slide 4. I'll provide the agenda for today's call. We will discuss the Smith & Williamson transaction, highlights of Q3 2019, provide an update on the key segments of our business, review our financial results, discuss our capital and liquidity position, and finally, close by outlining the focus for the remainder of 2019. After the prepared remarks, we'll be happy to take questions.

With that, I'll turn the call over to Kevin.

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [3]

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Thank you, Adrian, and thank you, everyone, for joining us on today's conference call. As was announced last week, Smith & Williamson and Tilney have agreed to merge to create the U.K.'s leading integrated wealth management and professional services group. The combined entity will be named Tilney Smith & Williamson and have AUM of over GBP 45 billion. The merger delivers on AGF's long-term investment strategy in the U.K. and allows us to participate as an investor in the combined firm, which will be a market leader in the U.K.

Based on the terms of the arrangement, AGF will receive total cash and equity proceeds of CAD 320 million, which is more than 2x our book value. We expect to receive total cash proceeds of CAD 277 million and retain a 2.3% equity interest in the combined entity.

The return on our investment gives us the flexibility to redeploy capital in a number of ways, including servicing debt repayment, funding future share buybacks and continuing to invest in new areas of growth.

The deal is expected to close in early 2020, subject to regulatory and customary closing conditions. We would like to congratulate Smith & Williamson and Tilney on this new partnership.

Moving on Side 6. We will discuss highlights of the third quarter. During the third quarter, we continued to execute against our strategy and stated goals. And I'll begin with some highlights.

In addition to the Smith & Williamson transaction, we filed prospectuses for 3 liquid alternative funds, which we are targeting to be available to Canadian investors in early October. We equipped our distribution teams with an interactive tool that can be used for portfolio stress testing, risk analytics and comprehensive investment proposals. This is part of our initiative to build a more digitally enabled sales force, providing them with the tools they need to meet the evolving needs of our clients.

Our Private Alternative AUM is $2.4 billion, which is solid progress toward our stated goal of reaching $5 billion in alternatives by 2022. We remain on track to meet our SG&A guidance of [$190 million] (corrected by company after the call) in 2019, even as we continue to invest in growth areas.

We reported adjusted diluted earnings per share of $0.18, which is $0.04 higher than both Q1 and Q2. And the Board confirmed a quarterly dividend of $0.08 per share for the third quarter.

Starting on Slide 7, we'll provide updates on our business performance. On this slide, we break down our total AUM in the categories disclosed in our MD&A and show comparisons to the prior year.

AUM ended the quarter at $37.4 billion. Mutual fund AUM decreased by 3%, and I'll provide some color on our mutual fund business in a moment. Institutional sub-advisory and ETF AUM decreased compared to prior year, driven by the committed redemptions that we announced last quarter. RFP and related activities have remained strong with interest on our AGFiQ, global equity, global sustainable growth equity and emerging market strategy. We are confident about our ability to generate gross sales within the institutional and sub-advisory segments.

For our ETF business, our Canadian suite of ETFs and U.S. exchange-listed funds, especially our risk mitigation strategies continue to experience growth. Our U.S. exchange-listed funds were recently added to the commission-free ETF platform of a major U.S. broker-dealer. We will be looking to leverage our U.S. teams 8-year track record in the coming weeks when we launch 3 liquid alt funds in Canada, which will use similar investment processes to their U.S.-listed counterparts. The 1 strategy, a market-neutral Anti-Beta ETF with a ticker QBTL is designed to provide a hedge to the equity markets, providing protection during drawdowns while maintaining upside participation.

The other, the U.S. Long/Short Dividend strategy will be delivered as both an ETF with a ticker QUDV and as a mutual fund is designed to provide income through equity dividends with bond-like risk profile. The new funds are all uniquely positioned to meet investor demand for income and for risk management.

Given the current stage of the cycle, we anticipate strong demand for our liquid alternative products. We believe alternative asset classes and strategies are fundamental building blocks for well-constructed portfolios, helping investors diversify their sources of returns and contributing to lower volatility and opportunities for better long-term risk-adjusted returns.

Our Private Alternatives platform more than doubled compared to the prior year and is becoming more significant portion of our business. AUM reached $2.4 billion this quarter, due to our latest fund, which raised considerable capital from institutional investors in Canada, United States, Europe and Asia. The fund will add further commitments later in the year and is expected to reach final close sometime in 2019. We are pleased with the progress and growth of AGF's Private Alternatives business. The growth in infrastructure AUM reflects strong investor appetite for middle-market energy, utilities and civil infrastructure opportunities in North America.

Turning to Slide 8. I'll provide some detail on mutual fund business. Since the spring of last year, the industry conditions have been challenging. For the past 12 months ending August, the Canadian mutual fund industry reported net redemptions of $8.6 billion compared to net sales of $22 billion in the prior 12 months.

Industry flows showed modest signs of improvement in the 3 months ending August; however, flows remained well below 2017 levels. In this challenging backdrop, AGF's retail mutual fund business, which excludes the net flows from institutional clients invested in mutual funds, reported net redemptions of $103 million for the quarter compared to net redemptions of $169 million in the prior second quarter.

Looking ahead, we're cautious about our mutual funds sales trajectory. Although the S&P 500 has increased roughly 8% since the end of Q2, there are risks of further volatility, which could influence industry and AGF sales levels.

We remain focused on executing our retail strategic priorities, which includes developing new strategic relationships and capitalizing on existing relationships, supporting advisers in both the IIROC and MFDA channels and providing innovative products and solutions around specific needs.

Before I pass the call to Adrian, I want to give a brief update on investment performance. As I've stated previously, our long-term target is to have 50% of our AUM above median in any 1 year and 60% of our AUM above median over 3 years.

After the current quarter, we will no longer be disclosing AUM above median. We have historically compared our trailered mutual funds to the population of competing funds and ETFs. With the proliferation of non-trailer versions of mutual funds and ETFs and their inclusion in the above median data sets, the metric is no longer relevant. We will consider alternative approaches in the coming quarters.

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

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [4]

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Thank you, Kevin. Slide 9 reflects the summary of our financial results for the third quarter with sequential quarter and year-over-year comparisons. For ease of comparison, we've included adjusted numbers and also restated prior period results for IFRS 15 throughout the remainder of the presentation. We recorded total revenue of $107.4 million in Q3 2019, which is slightly lower than Q2. Keep in mind that these revenue figures represent fees from only a portion of our AUM. Our Private Alternatives business, which is growing, is recorded using equity accounting, which picks up our proportionate share of only net income. As a result, the revenue growth in this business is not fully captured in our results.

Moving on to SG&A. Our expense guidance for 2019 is $190 million, and we remain comfortable with that guidance. Q3 SG&A was $47.3 million, which is in line. We've not provided formal guidance for 2020, but we've indicated that we anticipate a further expense decrease. We are currently undergoing our strategic planning process, and we'll provided formal guidance for 2020 on the next call.

Our EPS is $0.18 for the quarter, which is $0.04 higher than Q2. This growth is due to improved results from our wealth management business, supplemented by earnings from LP investments in our private alts business.

Turning to Slide 10. I'll walk you through the yield on our business in terms of basis points. This slide shows our revenue, operating expenses and EBITDA before commissions as percentage of average AUM on the current quarter as well as the trailing 12-month view. Note that AUM and related results from Smith & Williamson, the Private Alternatives platform, one-time items and other income are excluded.

The revenue yield in Q3 2019 is 110 basis points, which is 1 basis point higher than the trailing 12 months. Improvement has been partly driven by shifts in sales toward our stand-alone products, which generally have higher fees. Our international equity funds, such as AGF Global Select and AGF Global Dividend have long track records and are gaining flows.

Going forward, assuming normal business trajectory resumes, we expect net revenue to decline by approximately 2 basis points per year on total AUM excluding Private Alternatives, simply because our sales generally go into funds with lower fees as compared to our redemptions, which tend to be in funds with relatively higher fees. We will continue to monitor this.

EBITDA before commissions yield was 21 basis points, which is consistent with the trailing 12 months.

Turning to Slide 11. I'll discuss free cash flow and capital uses. This slide represents the last 5 quarters of consolidated free cash flow on a trailing 12-month basis adjusted for one-time items, as shown by the orange bars on the chart. The black line represents the percentage of free cash flow that was paid out as a dividend. Our trailing 12-month free cash flow was $51 million, and our dividend pay-out ratio was 49%. Taking into consideration both Stream and the Essential Infrastructure Fund as well as our additional $75 million commitment to the alternatives platform announced in January, our total remaining capital commitment to the alternatives platform is $89 million.

Year-to-date, we've recorded $13 million of income from our Private Alternatives platform, primarily from LP investments. We expect that sometime in Q4 the management fees from our alternatives platform will be sufficient to recover our working capital and begin recording earnings approximately $3 million per year from our share of management fee income.

We're committed to growing within the alternatives space. We believe that market dynamics will result in continued demand for passive, low cost investing and that institutions and financial advisers will continue to seek our differentiated products that have features such as negative correlation and strong cash flow. We've already responded with capabilities in the real asset space as well as liquid alternatives, where we've got 8-year track records on our U.S. Long/Short Dividend and market-neutral Anti-Beta strategies. We have enough opportunity to expand across the spectrum by growing our Private Alternatives business and adding to our complement of liquid alternative products.

As Kevin mentioned, we are leveraging our history in liquid alts with the launch of 3 new products in Canada. The Smith & Williamson transaction will provide resources to help accelerate this growth. We expect to receive total proceeds of $320 million, including cash of $277 million. In the short-term, we intend to repay debt, which currently stands at $160 million, leaving the remaining cash on our balance sheet.

We will re-lever as we execute on opportunities to grow. We think 1x debt to EBITDA is a good target, and we're comfortable increasing our net debt to EBITDA up to 2x.

In addition to managing our debt and growth, we'll be also considering return of capital to shareholders and expect to be active on our share buyback program. To determine the amount of share buybacks, we'll consider a number of items, including the timing of cash received from Smith & Williamson, our share price and free cash flow levels. The Smith & Williamson sale will also change our accounting between now and closing. From the announcement date, Smith & Williamson will be classified as held for sale and equity accounting will cease. AGF will then record only dividends received as part of fair value and other income. In addition to the $33 million special dividend related to the sale, we expect a normal course dividend in Q4 2019.

At closing, the remaining investment in the combined entity of CAD 43 million will be recorded on our balance sheet at fair value, and there's an opportunity to realize further value from this investment in the future.

Turning to Slide 12, I'll turn it to Kevin to wrap up today's call.

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [5]

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Thanks, Adrian. During Q3, we continued to make progress against our stated objectives. We expect to receive total cash and equity proceeds of $320 million from the merger of Smith & Williamson and Tilney. We'll be launching 3 new liquid alternative funds to meet investor demands for alternative asset classes and investment strategies. Our Private Alternatives AUM reached $2.4 billion, furthering our goal of reaching scale on this platform, and we remain on track to meet our 2019 SG&A guidance.

Along those lines, I'd like to reiterate our primary goals for the remainder of the year. First, to deliver consistent repeatable investment performance. Second is to maintain the trajectory of improvement in retail and institutional as well as continue to leverage the AGFiQ platform to establish this unique capability in the areas of quantitative investing, ETFs and liquid alts. Additionally, we would like to position the firm to reach $5 billion in Private Alternatives by 2022 and meet our SG&A guidance for 2019.

I want to thank everyone on the AGF team for all their hard work. And we will now take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question is from Gary Ho from Desjardins Capital.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [2]

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Just want to focus my questions on the S&W transaction and use of proceeds here. So Kevin or Adrian, can you kind of walk me through how you envision the use of proceeds scenario will play out over the next 12 to 24 months assuming that you're getting the $33 million pre-close and the rest at closing?

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [3]

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Yes. Just a couple of things, Gary. I mean -- I think, in previous earnings calls, we talked about it, right? A lot of the concern was around the fact that we would have to take this stake that we had in S&W public in a post-Brexit kind of world. I think there was a lot of concern about that. I think the value that we received on this is pretty attractive. And I think, probably as importantly is the fact that we were able to extract a significant amount of cash in this transaction and really alleviating the issue around a public offering for this stake in 2021, even later. Probably the biggest issue for us is the timing of these cash flows right now, in terms of when they're going to get paid, the special dividend as well as closing. And as you -- as everybody knows on this, we don't control with the regulators or approvals, et cetera. So the timing of both of those are a little bit out of our hands. So that will dictate the pace of how we do things. And as Adrian mentioned on the call, and we've said previously, really, it's a balanced approach to share buyback, debt repayment. But frankly, even more importantly, investing for our future growth initiatives that are on our strategy. So again, I think the timing question is a little hard right now, as we don't have direct visibility into the actual schedule of those payments. But you can think of it as a balanced approach with the emphasis on really driving growth in the future.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [4]

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Okay. Great. And then maybe tapping on to that, the buyback that you mentioned. So when can we assume you guys to resume that buyback? Are you guys still in the quiet period right now? And on the buyback, I guess, most firms have a stated amount for buyback or an intrinsic value where they're comfortable repurchasing shares. Can I -- can you walk us through how you guys view your buyback policy right now?

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [5]

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Yes. I mean, Gary, we have been in the blackout for quite some time. And I think it's been a tricky place for us with you guys because we've had this transaction that we have been working through. So we haven't been able to purchase anything really for most of the year on our NCIB. So we have full capacity on that to do something. But as Adrian said earlier, I think it really reflects -- it's a combination of the price and what are the things we will be able to do at the time around our growth. And so we don't have a definitive schedule for you on that. We think that we do have a fair amount of capacity under that existing NCIB because of the fact that we have been in blackout.

In terms of when that lifts, it lifts tomorrow. Literally, I think -- so 1 day after our reporting. And so as we mentioned, we probably will be active to start to sop up some of that. In terms of intrinsic value, we don't give that guidance out to you guys. So -- but I think we all reflect the fact that as we've said previously, I think the stock looks pretty attractive based on some of the fundamentals and the servicing and the value that we've just pointed to.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [6]

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Okay. That's helpful. And then just moving on, you mentioned the investments for growth. Can you elaborate what that might include outside of -- you mentioned I think the alts platform. Is it something that you want to build out organically? Or you're looking at kind of some tuck-ins, possibly? Some high-level thoughts would be helpful.

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [7]

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Yes. I think as we've said for quite some time, alternatives is part of the key part of our strategy to build that out and moving really on the spectrum of alternatives. So it'll be a mix of things such as the Private Alternatives, such as InstarAGF, Stream, furthering partnerships like that, that this allows us to potentially accelerate that as well and at the other end of the spectrum are liquid alts, that we'll be launching in a week or so.

And then in the middle of that is some hybrid of something that has those characteristics of those more locked-up investments to something that can be tagged on to something more liquid. So really start to build out and pivot away from our very good and fundamental core strategies now these alternative strategies. And so really -- and if you think about on that, that meet various different channels for all of us, could be our private client channel, could be retail, could be our institutional offer. So it's really a product set that I think will have a longer relevance, especially in the part of the cycle we're going through. So it's not a change in strategy, it's probably reaccelerating now some pieces of all of those.

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Operator [8]

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Our next question is from Graham Ryding from TD Securities.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [9]

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Just on that similar theme. If I look at your $2.4 billion in alternatives, I think you have a $117 million co-invested right now that's on your balance sheet. So when we think of what you're building towards $5 billion by 2022, should we be assuming a similar proportion for your co-investment, which, I guess, would roughly imply $250 million on your balance sheet?

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [10]

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Graham, it's Adrian. So I would say that as we start to grow the alternative business and it gains more scale, the whole idea is to manage the proportion of capital we've got invested relative to the management fees and earnings from the platform. And clearly, as the platform gains scale, that ratio should decline, right? So as we add on to existing platforms, there's less of a need to support those with treasury capital. And as I mentioned in my remarks, the earnings that we've been experiencing from our alternatives platform in the past had typically been from investing in LPs. But as you noted, now that we've got $2.4 billion in AUM, we expect to be able to realize more on the management fee side, and so we'll be reaching that goal, improving that ratio. And I'll repeat that probably sometime in Q4 with the scale that what we've achieved, we'll be dropping around $3 million of net income to our bottom line from our share in the management fee income from the platform.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [11]

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Okay. That's helpful. And that was my next question, just in Q4 that $3 million you're referring to, does that reflect you the earnings that you sort of booked for the entire fiscal 2019 you're going to earn them in Q4? And then going forward, that should sort of be an annualized run rate at this level of alternative AUM?

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [12]

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Yes. I would say that, that is an annualized number. So it'll be -- and then in Q4, it'll be more difficult to predict because we'll start to accrue that sometime in Q4. But to your point, in 2020, you should expect a full year of its spread relatively evenly across each quarter. And Kevin eluded to some of the things we're working on the alternatives side, our goal is to grow out that alternatives business and increase the amount of management fee earnings that we record from that business, and we're in a better position to do that now after the Smith & Williamson transaction closes because we'll have more dry powder and more resources to assist in growing that business.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [13]

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Okay. Got it. So there's no catch up then in next quarter in terms of the -- of your earnings from that AGF Instar? It's just you're going to accrue one quarter's worth of...

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [14]

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Yes. To be honest with you Graham, there is a little bit of a catch up, not to get into how the accounting works too deep. But typically, with alternatives funds the way it works is that, you charge fees from the time that you got your first commitment, but you actually don't collect those fees until you do your first investment. And so that's a situation we expect to be in Q4. To complicate things even more than that, we've actually capitalized some of the operating expenses on our balance sheet, and we have to burn through those before they go on to our income statement. And that's why I'm kind of giving you the guidance that Q4 is a little bit less or a little more difficult to model, but 2020 will be a bit more stable and easier to model with that $3 million spread evenly over 4 quarters.

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Graham Ryding, TD Securities Equity Research - Research Analyst of Financial Services [15]

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Okay. Okay, that's helpful. And then just when you look into fiscal 2020 for your alternatives platform, what should we be expecting here? Is it a combination of you deploying the money that you've raised this year, I think it's over USD 1 billion, deploying that as well as will you start fund-raising for a fourth fund?

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [16]

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Yes. I mean...

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [17]

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Graham, this is Kevin. I think, yes. So fund 2 is still in the -- Instar fund is still in what I call capital raise mode but we are starting to invest. That will take some time to get that fully invested. So to the extent that we have other opportunities to deploy that capital throughout the year, we will. But think -- on the infrastructure fund, that will be -- again, they -- a little bit more fund-raising to do, but they'll be fully invested over the next year. So you won't see another fund raised in 2020 on the infrastructure side.

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Operator [18]

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Our next question is from Phil Hardie from Scotiabank.

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Phil Hardie, Scotiabank Global Banking and Markets, Research Division - Director, Diversified Financials and Analyst [19]

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Most of my questions have been asked and answered. But I wonder if you can just touch on one quickly on Smith & Williamson. Can you talk about the -- maybe tax strategies and tax implications on the $320 million in proceeds?

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [20]

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Yes. Sure. So it's Adrian. There are some opportunities to minimize taxes on the Smith & Williamson transaction effectively to the extent that we have contributed surplus. We would not pay tax on that. So we can sort of do some tax planning to adjust our tax base for taxation purposes. If you're looking for sort of a ballpark figure, we don't have an exact number, but you can use around $20 million for the total tax on that transaction.

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Operator [21]

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Our next question is from Tom MacKinnon from BMO Capital.

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Tom MacKinnon, BMO Capital Markets Equity Research - MD & Analyst [22]

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If I look at this time last year you were talking about how much better you were versus industry in terms of retail mutual fund gross sales. But if I look at retail mutual fund gross sales in the quarter, you're down 17% year-over-year versus the industry, which is probably up maybe closer to 10%. And if not, just -- that trends is not just for this quarter, year-to-date your retail mutual fund gross sales are down about 20% and compared to an industry, that may be closer to flat. So is this just because 2018 was so good? Or is there any other thing at work here? Is it because of the regulatory environment around DSC is changing? And what channels are you seeing these -- this slowdown in gross sales in? Is it in MFDA or IIROC or both?

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [23]

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Yes. Tom, it's Kevin. I'm not sure what data you're referring to on the industry stuff, but when we look at the industry through August from '19 to '18, it's about 46% drop for the industry from where last year was at this time to where we're at this year. And so...

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Tom MacKinnon, BMO Capital Markets Equity Research - MD & Analyst [24]

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I'm talking gross, not net sales, right?

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [25]

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I'm looking at net. Yes. So I'm just looking at...

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Tom MacKinnon, BMO Capital Markets Equity Research - MD & Analyst [26]

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Yes. I'm talking gross sales. So everything about here is on gross sales. So your gross sales are down 17% in the quarter, down 20% year-to-date and the industry is doing -- is having gross sales that are up on average 10% year-over-year in the quarter, and year-to-date, they're probably more like flat. So in terms of gross sales what's going on here?

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [27]

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Yes. I mean on the gross side, I think there was some softness. I don't have the gross in front of me. Tom, you can circle back on that number. We tend to look a lot on net, and I'd say on the net piece, we've been tracking closer to where, I think, the industry has been, if not to a little bit better or worse some months, in or out, but not dramatically on the gross side. We've seen, I think, with some others in the independent channel, some issues on the gross side this year as investor confidence has been banged around a bit as you started the year. Post the end of last year, we probably had the worst RSP season in history. So yes, I'd say, we need to circle back on the gross side, I don't have those numbers actually in front of me, but on the -- we look at net, and I think as I've said, I think we tend to track a little bit toward the industry, if not in and out, better or worse month to month.

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Tom MacKinnon, BMO Capital Markets Equity Research - MD & Analyst [28]

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Yes. Okay. I appreciate you give us some color around the decline you're having versus industry in gross sales and if it's -- if you can follow up, if you're finding anything, is it related to an uncertain regulatory environment around DSCs or what channels? And so if you can get back to me on that, that would be perfect.

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Kevin Andrew McCreadie, AGF Management Limited - CEO, CIO & Director [29]

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Yes. Absolutely. But I would say that -- yes, we don't think it's a regulatory issue, Tom. I think it's more about if you look at where the market volatility has been and where we are in the cycle, and you look at the first couple of months of the year during the RSP season after the 20% decline in the fourth quarter, and you can see a pretty good pullback in investor sentiment, certainly on the retail side in Canada. So I think that has more to do with the gross impact than regulatory, but we'll circle back.

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Operator [30]

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We have no further questions at this time. And I'll turn it back over to Adrian for final remarks.

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Adrian Basaraba, AGF Management Limited - Senior VP & CFO [31]

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Thank you very much for joining us today. Our next earnings call will take place on January 22, 2020, when we will review our results for Q4 2019. Details of this call will be posted on our website. Finally, an archive of the audio webcast of today's call with supporting materials will be available in the Investor Relations section of our website. Good day, everyone.

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Operator [32]

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Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for participating, and you may now disconnect.