IGM's Q2 results dreary

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COLE BREILAND / WINNIPEG FREE PRESS IGM Financial's assets under management dropped 9.7 per cent in the second quarter of 2012.

The ongoing stock-market woes are creating bottom-line headaches for Winnipeg-based IGM Financial Inc., one of Canada's largest mutual fund companies.

IGM Financial, whose principal operations include Investors Group Inc. and Mackenzie Financial Corp., was hit with a 15.9 per cent decline in operating earnings in the second quarter of this year -- $179.0 million versus $212.8 million in the same period in 2011.

The main reason for the decline was a 9.7 per cent drop in the value of assets under management (AUM) during that same period -- $119.2 billion versus $132.0 billion -- as fed-up investors fled equity-based mutual funds and poured their money into less risky fixed-income products such as bonds.

Murray Taylor, co-president and CEO of IGM Financial and president and CEO of Investors Group, said when stock markets fall, equity-based mutual funds values also take a hit, which drives down AUM values. And the second quarter of this year was no exception.

He also said the second-quarter earnings decline wasn't out of line with some of the declines seen during other equity-market downturns over the last three to four years.

IGM also wasn't the only mutual fund company to see its earning decline.

Paul Holden, a financial services analyst with CIBC World Markets, said the entire industry is in a funk these days as a growing number of Canadian investors switch from equity funds to fixed-income products.

Holden said Investors Group has actually fared a little better than most independent mutual fund companies because it has its own in-house sales staff, rather than relying on outside financial advisers to send clients its way.

With no end in sight to the European debt and financial crisis, Holden said he expects the shift from equity to fixed-income products to continue until at least the end of this year.

To try and counteract that trend, Taylor said IGM has been urging its clients to take a long-term, balanced approach with their investments, rather than yanking their money out of equity mutual funds every time the stock markets take a tumble.

In a bid to attract more mutual fund investors, IGM has also reduced the management fees it charges on about two-thirds of its products, starting last month. The cuts range from 0.05 per cent to 0.40 per cent per year.

Canada's mutual fund industry has been under pressure to lower management fees, and the IGM cuts brought its fees more in line with those of some of its major competitors.

Taylor told industry analysts on Thursday the changes are already starting to bring in more business, although he wouldn't say how much more.

IGM said its net earnings took an even bigger hit during the second quarter, falling by 19.3 per cent to $172.6 million, or 67 cents per share. Taylor said that was mainly due to a one-time income tax charge of $6.4 million resulting from increases in corporate income rates in Ontario.

That also reduced net earnings for the first six months of the year. IGM said they were down 12.6 per cent to $372.3 million, or $1.45 per share, from $426.0 million, or $1.64 per share in the first half of 2011.

murray.mcneill@freepress.mb.ca

City fund firms register

significant drop in sales

HERE are some of the highlights from second- quarter and first-half financial results for IGM Financial Inc.'s two principal operations: Investors Group Inc. and Mackenzie Financial Corp.

Investors Group:

-- Mutual fund sales fell to $1.31 billion in the second quarter from $1.40 billion in the second quarter of 2011.

-- Sales for the first six months dropped to $3.14 billion from $3.45 billion.

-- Mutual fund net redemptions for the second quarter jumped to $324 million from $145 million.

-- For the first six months, redemptions fell to $149 million from $359 million a year earlier.

-- There were 4,526 financial advisers, or consultants, on staff as of June 30 -- four more than at the end of the first quarter of 2012.

-- Assets under management declined by 6.5 per cent to $58.1 billion from $62.2 billion.

Mackenzie Financial Corp.:

-- Second-quarter sales were $1.96 billion versus $2.68 billion.

-- First-half sales dropped to $4.68 billion from $6.17 billion.

-- Second-quarter net redemptions soared to $1.29 billion from $173 million a year earlier.

-- First-half redemptions jumped to $2.22 billion from $52 million.

-- Assets under management declined by 11.9 per cent to $60.7 billion from $68.8 billion.

Republished from the Winnipeg Free Press print edition August 3, 2012 B4