Thank you for standing by, and welcome to the Q4 2023 AGF Management Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Tsang. You may begin.
Thank you, operator, and good morning, everyone. I'm Ken Tsang, Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the Fourth Quarter and fiscal 2023. Slides supporting today's call and webcast can be found in the Investor Relations section of agf.com. Also speaking on the call today will be Kevin McCreadie, Chief Executive Officer and Chief Investment Officer. For the questions and answers period with investment analysts following this presentation, Judy Goldring, President and Head of Global Distribution, and Ash Lawrence, Head of Private Capital, will also be available to address questions. Turning to slide four, I'll provide the agenda for today's call. We will discuss highlights of the Fourth Quarter and fiscal 2023, provide an update on our business, review our financial results, discuss our capital and liquidity position, and finally, close by summarizing the key investment highlights for AGF.
After the prepared remarks, we will be happy to take questions. With that, I will now turn the call over to Kevin.
Thank you, Ken, and thank you, everyone, for joining us today. 2023 was another year characterized by challenging market and business conditions, where elevated interest rates and consumer prices continued to dampen investor sentiment. We demonstrated our resilience and continued to execute on our long-term plan to diversify our business across asset classes and client channels, giving us the stability to persevere and grow. We ended the year with AUM and fee-earning assets of CAD 42.2 billion. We continued to see strong momentum in our ETF and SMA AUM, which was up 19% year-over-year. The AGF European Equity Class won a 2023 Lipper Fund Award on a three-year performance in the European equity category. Adjusted diluted EPS for the year was CAD 1.34 per share, up 33% year-over-year.
Our capital position remains strong, and as of November 2023, we generated CAD 80 million of free cash flow for the year and have CAD 144 million available on our credit facility. In addition, we have CAD 50 million in cash and CAD 277 million in short- and long-term investments on our balance sheet. We have capital available and flexibility on our capital allocation strategy. We also paid a quarterly dividend of CAD 0.11 per share for the Fourth Quarter. And last week, we announced the acquisition of a 51% interest in Kensington Capital Partners Limited. Kensington is one of Canada's leading alternative investment firms with CAD 2.6 billion in AUM. I'll speak more to this later on, and Ash will be available for questions. Starting on slide 6, we will provide updates on our business performance.
On this slide, we break down our total AUM and fee-earning assets in the categories disclosed in our MD&A and show comparisons to the prior year. Mutual fund AUM increased 2% year-over-year compared to the industry, which increased by only 0.3%. Recall that starting last quarter, we are providing a breakdown of our ETF and SMA AUM, which was previously included in the institutional sub-advisory and ETF AUM. This provides additional transparency in this category as we focus our strategy to grow our presence in the investment dealer and SMA channels through the expansion of our vehicle-agnostic model. We ended the year with CAD 1.5 billion of AUM in this category, an increase of over CAD 200 million from a year ago. I'll provide more color on our mutual fund business and ETFs and SMA AUM in a moment.
Segregated accounts and sub-advisory AUM decreased by 6% compared to the prior year. The decline was mainly driven by institutional clients continuing to reduce exposure to public equities, as well as dampen investor sentiment. During the quarter, we onboarded one of our global equity strategies onto an institutional platform in Asia. Getting onto this platform expands our distribution reach for the strategy, and we expect AUM from this platform to build over time. Finally, we continue to see interest from institutional investors across multiple strategies and jurisdictions, which bodes well for future sales. Our private wealth business remained steady with CAD 7.3 billion in AUM, and our private capital AUM and fee-earning assets were CAD 2.1 billion at the end of the quarter. Closing the Kensington transaction will increase our private capital assets to CAD 4.7 billion.
Turning to slide seven, I'll provide some details on the mutual fund business. Canadian mutual fund industry experienced net outflows of approximately CAD 33 billion in the quarter. This was the industry's 7th consecutive quarter of net outflows and has extended the longest quarterly streak of industry outflows in over 20 years, demonstrating a persistent weakness in investors' sentiment. The Canadian mutual fund industry started its net redemption trend in Q2 of 2022, when the Bank of Canada started raising rates. That trend continued this quarter, with investors feeling the pressure of sustained higher interest rates and consumer prices, leading them to more move money out of mutual funds and into cash, which they are using to pay bills or holding in investments with higher interest or guaranteed returns.
Despite that backdrop, we are pleased with how resilient our net flows have been as we continue to outperform the industry. On the back of dampened industry flows, we reported retail mutual funds net redemptions of CAD 194 million for the quarter. During the quarter, AGF's net redemptions as a percentage of AUM was 90 basis points, half the industry's level of 1.8%. Since the industry turned to net redemptions in Q2 of 2022, the industry has suffered over CAD 136 billion of net redemptions, while AGF outperformed the industry and our peers and achieved positive net sales of approximately CAD 200 million for the same period, allowing us to grow our overall market share. These results reflect the continued progress of our strategy in 2023, as we focused on diversifying and expanding our client base while evolving our product offerings.
I want to now give a quick update on our investment performance. AGF measures mutual fund performance by comparing gross returns before fees relative to peers within the same category, with the first percentile being the best possible performance. We target an average percentile ranking versus peers of 50% over any one year and 40% over three years. At the end of Q4, our average percentile ranking was 72% over the past one and 40% over the past three years. Our one-year performance continued to be impacted by the narrowness of the market exhibited in the first half of 2023, led by a small group of U.S. mega cap tech stocks. The last six months' performance has been operating at a 50 percentile ranking.
AGF funds have been actively managed and have generally been underweight mega cap tech versus peers, and have had a bias towards smaller, large cap and midcap stocks, which saw notably favorable performance in 2022 and the second half of 2023. Our long-term fund performance remains solid, with approximately 60% of our strategies outperforming our peers on a three and five year basis. We remain confident in our investment management team and our disciplined investment processes, given our extensive collective experience and demonstrated ability to navigate different cycles of the markets in the past. Slide eight shows our ETF and SMA AUM. The AUM in this category has grown 47% on a compounded basis over the last two years. Included in this number are Canadian and US ETFs and SMA platforms.
We have seen consistent growth and momentum in the SMA business, both in the U.S. and Canada, where a number of strategies are available on leading SMA and wealth management platforms. With that, I will turn the call over to Ken.
Thanks, Kevin. Slide nine reflects a summary of our financial results for the Fourth Quarter, with sequential quarter and annual year-over-year comparisons. 2023 results included CAD 1.3 million of severance and CAD 2.1 million in corporate development and acquisition-related expenses. For ease of comparison, we have shown our results adjusted for these costs. Adjusted EBITDA for the quarter was CAD 27.6 million, 18% lower than the prior quarter, due to lower average AUM and lower revenues from our private capital business. Adjusted diluted EPS of CAD 0.28 was CAD 0.06 lower than the prior quarter. Net management fees for the quarter were CAD 72 million. We saw a 2.4% decrease over Q3, mainly due to lower average AUM levels as the market experienced high volatility during the quarter.
Q4 saw market downswings in September and October, followed by a strong rebound in November, which resulted in an overall average AUM decrease in the quarter. AGF Private Capital contributed revenues of CAD 3.9 million in the quarter, which is CAD 3.4 million lower than Q3. Revenue from private capital managers this quarter included CAD 0.7 million of carried interest earnings and performance fees, recognizing strong performance in our long-term private capital investments in our private credit vehicles. This compares to CAD 1.8 million of carried interest earnings and performance fees recorded in Q3. Carried interest and performance fees can be variable quarter to quarter and is impacted by the timing of monetizations within the funds. Revenues from private capital LP funds, where AGF participates as an investor, were CAD 2.5 million.
After two very strong quarters, revenues were back down in Q4 and were CAD 2.3 million lower than Q3, driven by lower fair value adjustments. Fair value adjustments on the investments can be lumpy quarter to quarter. Since inception, our investments have returned an IRR in excess of 11%. Full year 2023 adjusted EBITDA of CAD 132.5 million was 25% higher than the prior year, and EPS of CAD 1.34 was 33% higher than the prior year. Before I leave this slide, I'll address our SG&A guidance. Adjusted SG&A in 2023, which excludes severance and corporate development and acquisition-related expenses, were CAD 205.6 million, which is in line with our guidance.
As we look ahead to 2024, we are guiding adjusted SG&A to CAD 209 million, which is a modest 1.7% increase against 2023. We continue to be thoughtful and disciplined in our expenses while also investing for growth. Our adjusted SG&A guidance of CAD 209 million does not include severance, corporate development, and acquisition-related expenses, and incremental SG&A related to acquisitions, including the acquisition of Kensington, which is expected to close in Q2 2024. We will provide revised SG&A guidance following that close.... Our adjusted SG&A guidance also assumes investment performance, fund sales, and AGF stock price trades at a certain level. Due to the variable nature of performance bonuses and stock-based compensation, changes in any of these areas can result in change to our overall SG&A expenses.
Turning to slide 10, I will walk through the yield on our business in terms of basis points. This slide shows our average AUM, net management fees, adjusted SG&A, and EBITDA as basis points on our average AUM in the current quarter, previous quarter, and trailing twelve months. This view excludes AUM and related results from the private capital business, as well as DSC revenues, other income, severance, corporate development, and acquisition-related expenses. Q4 2023 net management fee yield was 74 basis points, which is in line with previous quarters and the trailing twelve months. SG&A, as a percentage of AUM, was 52 basis points this quarter, 2 basis points higher than the prior quarter, mostly due to lower AUM levels and flat to the trailing twelve months.
EBITDA yield was 22 basis points in the quarter, which is one basis points lower than the prior quarter and flat to the 12 trailing months. Turning to slide 11, I will discuss our free cash flows and capital use. This slide represents the last five quarters of consolidated free cash flows on a trailing twelve-month basis, as shown by the orange bars on the chart. The black line represents the percentage of free cash flows that was paid out as dividends. Our trailing twelve-month cash flow was CAD 80 million, and our dividend paid as a percentage of free cash flows was 34%. In the same period, we returned CAD 41 million to shareholders in the form of dividends and share repurchases under our NCIB.
Our cash balance as at the end of November was CAD 50 million, and we have CAD 277 million in short-term and long-term investments. We have CAD 144 million remaining on a credit facility, which provides credit to a maximum of CAD 150 million. Our remaining capital commitment to our existing private capital LPs is CAD 22 million. Capital commitments may be funded from excess free cash flows, but keep in mind, there will also be further recycling of capital as distributions occur, which will help to fund future commitments or future acquisitions. Taking all of this into account, we have ample capital to, to deploy, even after considering our 51% acquisition of Kensington. Our future capital allocation will be balanced and includes returning capital to shareholders in the form of dividends and share buybacks, as well as investing in areas of growth.
Redeploying our remaining excess capital to drive growth and generating recurring earnings remains a key strategic priority. I will now pass it back to Kevin.
Thanks, Ken. And before I wrap up today's call, let me take a moment to touch on our alternative strategy and elaborate further on the Kensington transaction. We started our journey about 10 years ago, when we partnered with different partners on the private credit and infrastructure side. Since then, in addition to our private markets business, we have also been building our capabilities in liquid alternatives, including our market neutral anti-beta ETF strategy, which have garnered interest from investors over the past few years. In the last 2 years, with Ash Lawrence coming on board, we made it a strategic priority to significantly scale this business through acquisitions.
Our objectives are to build a diversified private alternatives business that is meaningful in scale, offer a breadth of products that meet the needs of our retail and institutional clients as demand for alternative products continues to grow, and generate material and sustainable income streams from this business. We continue to be excited about this space, given the growth of the overall industry. Turning to slide 13, I'll provide additional details on how the Kensington transaction fits with this strategy. On January fifteenth, we signed definitive agreements to acquire a majority interest in Kensington Capital Partners, a leading Canadian alternative investment firm with CAD 2.6 billion in AUM. Founded in 1996, Kensington is a well-established name in Canada. It offers an industry-first, open-ended private equity fund, targeted primarily through the same channels.
They also have a hybrid investment approach, investing into funds and directly into companies across buyouts, growth equity, and venture capital, which provides a diversified return profile for investors. They have a very long history and proven track record of returns. We will be acquiring 51% interest in Kensington for CAD 45 million. The remaining 49% will mostly be held by Kensington's three senior managing directors, who will continue to lead the business. There's a small earn-out, which is based on meeting certain growth targets in the next 12 months. Kensington retains investment and operational independence, and they will also keep the Kensington brand. We've been talking to Kensington for over a year and felt like the strategic focus and cultural fit well for AGF.
The addition of Kensington and their expertise in private equity will add to our existing private credit strategy and alternative capabilities, expanding our client offerings and the avenues of growth. As part of the AGF family, Kensington can also accelerate its growth by benefiting from the size and scale of our business, our broad distribution reach, and access to our product development expertise and operating infrastructure. We expect to fund the acquisition by drawing from our revolving credit facility. As a reminder, we have healthy free cash flows, so we're expecting to pay down the debt in a relatively short period of time. From a financial perspective, the transaction is expected to be accretive to 12-month run rate earnings. Turning to slide 14, I will wrap up today's call. Despite a challenging 2023, AGF remained resilient and continued to successfully execute on our strategy.
While the industry suffered net redemptions equivalent to 4.2% of total AUM, our mutual fund business outperformed, reporting only CAD 77 million of net redemptions, which is approximately 0.3% of our AUM. Our SMA and ETF business all continued its momentum in 2023, growing 19% year-over-year. Our adjusted diluted EPS for the year was CAD 1.34, up 33% from the prior year. The firm celebrated 55 years of AGF Management Limited stock being listed on the TSX. This longevity is a testament to AGF's history of innovation, disciplined investment approach, and an unwavering commitment to our clients. AGF was also recognized as one of Greater Toronto's top employers for 2024, reflecting our strong culture and the work we have done to invest in our people.
As we head into 2024, we remain focused on four strategic priorities. One, to deliver consistent and repeatable investment performance, as well as maintain sales momentum and penetrate distribution channels with high growth opportunities. We also want to continue to build a diversified private capital and alternatives business and meet our expense guidance while continuing to invest in key growth areas. Finally, I want to thank everyone on the AGF team for all of their hard work. We will now take your questions.
Thank you. If you have a question at this time, please press star one one on your touchtone telephone. One moment for our first question. Our first question is going to come from the line of Geoffrey Kwan with RBC Capital Markets. Your line is open. Please go ahead.
Hi, good morning. Just on the Kensington transaction, you talked about it being accretive in the first year. Is there any sort of qualifier descriptor you can provide in terms of, are we talking low, mid, high, single-digit, or even double-digit accretion over that first 12 months post-closing?
Yeah. Hi, Jeff. Thanks for the question. Obviously the actual dollar impact on our earnings will depend on the timing of closing. Just to give you a general sense, though, on a run rate, 12-month basis, and specifically just looking at management fees, so this would exclude any type of performance-related fees or expenses, we are looking at an EPS accretion before any debt financing costs of about $0.05 per share.
Okay. So, okay, CAD 0.05. Actually, the SG&A guidance that you have, I get the, the investment performance component is going to be hard to kind of quantify and scenario, but are you able to kind of provide a little bit more clarity around what the kind of going assumption on what the net sales performance is to get to that number?
So, hey, Jeff, it's Kevin. If you're talking about SG&A and why it's a little bit more muted, that's not a forecast on a degradation in sales or investment performance. It's actually just a thoughtful view of how we think about resources for next year. So it's not related to a change in our thinking on either sales or investment performance, if that's your question.
Well, no, no. I was getting at, it's underpinned by some numbers, so that if, for example, net sales get to be much stronger than what you're expecting, then I would expect the SG&A is going up. But I just—I don't know what that base level is in terms of the assumption of net sales performance for 2024 versus, let's say, what it was in 2023.
Yeah, sure. I mean, I can address that, Jeff. Maybe on the SG&A guidance itself, you know, we don't provide specific breakdowns on the components. I will tell you, though, that the increase from roughly CAD 205.6 million to CAD 209 million is going to primarily be driven by non-compensation related expenses. Our plan, you know, notwithstanding any huge swings in sales, is to keep our overall headcount costs relatively flat. And that's just part of the disciplined cost management focus that we are going to have, whereby we will be, you know, just taking a much closer look at where headcount needs to be overall, relative to where the business is.
So with that, it sounds like, and tell me if I'm wrong here, it kind of is... The net sales performance, it sounds like it kind of assumes 2024 looks like how we've seen in the past quarter or two of 2023.
Well, I mean, I can speak to sort of what we're seeing trajectory-wise. I mean, as we talked about or as we presented, in fact, if you look at page seven of the presentation, it does show how our overall performance was for 2023. And as we talked about, we had an adjusted retail mutual funds net redemption number of CAD 41 million, but that was against an industry that saw, you know, huge outflows through 2023. And even if you look at the Q3 to Q4 number, redemptions did get worsened within the industry by 73%, but we actually saw ours only decrease by 28%. So we're seeing that our particular numbers, when we look at our net redemption rate, we are as against the AUM, it's half of what the industry is.
We're seeing its gross flows are up 8.5%, between Q3, Q4 relative to industry being flat on growth. I think what this is, it's a redemption story, and as we see the year progress, we do see continued hardship with that group of investors who need that cash and access to the cash. So from a trajectory perspective, we're anticipating it's still a strong year, but as it underpins the budget, it's just one of many elements of former SG&A.
Okay, maybe if I can just sneak in one last question, kind of related to that, Judy, is, if there's a number you have on what the Q1 2024 to date retail net sales are, and just kind of thoughts. It sounds like, maybe a bit more muted, but just outlook for RSP season for this year.
Yeah, I mean, I think, for sure, Q1 2024 month to date is -CAD 70 million. Fiscal year to date, which starts December 1, is -CAD 131 million. Again, we're still seeing some strong growth flows, and so I think this really continues to be a redemption story, which again, given the continued, high interest rate environment and inflation environment, we probably do anticipate that that will continue for, RSP season. But RSP season is traditionally a much stronger season for us. And so, again, just knowing how we are operating as against the industry, we do have a better-than-industry redemption rate, and so we do expect to sort of see a, a deceleration, if you will, in that rate of redemption.
Yeah, Jeff, let me follow on with what Judy said. You can see if you look at it, it's not been a gross issue for us, right? It's, and even the industry was sort of flat quarter to quarter. RSP season really won't kick in, I think, until really next week or so. My guess is with the deceleration in the net side, and if you look at from November improving, you know, November was tough on the industry. The quarter was tough, but December, I think the industry was out CAD 6 billion, so it's a pretty good improvement. So I would expect that the RSP season on the growth side could be okay, and the net side may even have a shot of breaking even.
But I think until you really see, as we've talked on the previous call, some relief on rates from the Bank of Canada, which looks like it's later in the spring, maybe early summer, that's probably not, that's probably really when you're going to see a sustained return to the industry flow.
Okay, great. Thank you.
Thank you. One moment while we move on to our next question. Our next question comes from the line of Gary Ho with Desjardins. Your line is open. Please go ahead.
Okay, can't hear you.
Your microphone might be on mute.
Can you hear me?
We can now.
Now we can, yeah.
Yeah. Thanks for taking my question. Sorry about that. Yeah, so my first one is on the fair value and other income for Q4. It was a tad light versus the other quarters. So is this just a lumpiness, and should we still model the, I think, 8%-10% on return of your long-term investment looking at?
Hi, Gary. Yeah, I can answer that question. Yes, Q4, I would say overall, the earnings from private capital was a bit lower. While we still had an overall positive fair value adjustments, we have sort of pointed to sort of the lumpiness in these fair value adjustments. One thing I would highlight, though, however, is if you kind of look on the full year, on a full year basis, our overall private capital earnings have increased, right? And that's an increase both from private capital managers and on the private capital side. So to more specifically answer your question, if you kind of look at our overall private capital LP returns for the year, that's been about CAD 25 million in 2022 and about CAD 26.6 million in 2023.
And if you just take that as a percentage of our overall invested capital of about CAD 215 million or so, you'll, you'll note that the, the return profile is north of the 8%-10%, returns that we've, we've guided. We have, as we've looked at internal models, seen, the internal rate of return since its set inception of, on a pre-tax basis, closer to around 11, 11.5% or so. So I would say yes, the, the, the model that you have right now in terms of guiding for, for forward-looking, earnings at that 8, that 10% or so level, is, you know, would, would seem reasonable to us.
Got it. Thank you. And, just want to go back to the SG&A guidance a little bit. So CAD 209, it's like a 1.7% increase year-over-year. It seems low, so what gives you the confidence that you'll be able to hold the expense lines?
Sure. Yeah, I can, I can take that as well, Gary. As I mentioned earlier to Jeff, most of that increase is really driven by what we expect to be an increase in costs and really non-compensation related expenses, things like sales and marketing, as we continue to invest in growth. From a headcount or headcount and I guess compensation perspective, we're generally going to be keeping that flat year over year. And that's just really through, you know, continued rigorous, you know, cost management from a headcount perspective.
Yeah, and Gary, let me just add that, you know, we've had a pretty good success around expenses. We took a lot of expenses out, you know, as you know, pre-COVID. And you know, last year we had to come out and just reminding everybody that Q1 is always a little higher for us. So you can't just annualize that number and split it, take that number and split it in four. So just when you think about that model, Q1 tends to be just a little bit higher. But we've been pretty good about holding the line on with that guidance over time. That guidance, as Ken has said, will change a little bit when we bring in the Kensington.
So we'll be able to give you updated guidance in Q1, hopefully, when that closes about the combined SG&A.
Yeah, and maybe the last point I'll make is that that guidance does exclude severance and corporate development costs.
All right, thank you. And my last one is perhaps for Kevin or Ash. So on the private alt build out, on slide, you point to an 8% CAGR to 2028. But the Kensington did bring you closer to the CAD 5 billion AUM target. Maybe you can just provide me, like, a breakdown of some opportunities you're seeing?
Can I go ahead, Ash? Want to check that?
Yeah, sure. Hi, Gary, it's Ash. So consistent with, with the balance of our other businesses, we're not going to be providing forward AUM guidance on, on AUM. But on a more practical basis, as we rethought our strategy and went to an M&A strategy, and certainly in the near term, while a lot of that AUM growth is going to come in lumpy M&A transactions, it really is quite difficult to provide guidance on where that's going to be 12 months or 18 months from now. But in the near term, we are still seeing activity in our pipeline, which over the last 12 months, as Kevin has said on some previous calls, is pretty active, and we do expect some positive momentum now with the Kensington deal out there and publicized in terms of inbound calls and continued pipeline activity.
So we do expect continued transactional activity for us in the near term. But there are a lot of factors in how we decide on managers that we would like to work with. AUM is one factor, but it is not the deciding factor. We'll choose the right manager, taking a number of factors into place, and AUM could vary depending on the manager and the profile.
Thank you for taking the question. I'll pass the line.
Thank you, and one moment for our next question. And our next question is going to come from the line of Tom MacKinnon with BMO Capital. Your line is open. Please go ahead.
Yeah, thanks. Good morning. Just with respect to the Kensington acquisition, I think you embarked on this M&A strategy some time ago, and we haven't seen any kind of transaction until the announcement of the Kensington acquisition. So I'm wondering what was it about Kensington, or what was it about the market with respect to private credit that changed in order to make this transaction happen? Have you seen kind of bid-ask spreads come in more now? Do you expect that we're going to have to wait another year or so before another transaction? What has changed in that market? And then what was it with respect to Kensington that you know allowed you to, to sort of pull the trigger here?
Yeah, Tom, let me start, and I'll give it to Ash to do the bulk of this. But, reminder, Kensington is private equity, and Ash can get into some details on that. We've had infrastructure and private credit on the platform, really as investments, that we've helped raise over time. So this is a change in, a little bit in the strategy to what you point out, which is more toward M&A versus investing capabilities, internally. And so maybe Ash can give you some color on that. But we've had—It's not private credit, which we've had on the platform for a bit. This is a new asset class, if you will.
Yeah, sure, and maybe I'll give a fulsome answer, sort of on timeframe. So when I started at AGF, which was early 2022, was when we started the rethink of the strategy and then launched in earnest later that year around what I'll describe as origination of relationships. One thing I will point out is because we are looking at what I'll call small and mid-sized managers, where the value proposition of being part of AGF's family is meaningful that, for them, we are dealing with private companies and often dealing with private companies run by founders. Building that relationship and trust and the general deal cycle does take some time.
So from our origination start, we are coming up to sort of just over 12 months, call it 12-15 months of activity in the market, from a pipeline perspective. And so the Kensington announcement sort of falls within that cycle of, deal relationship building, followed by, what is a relatively complex transaction as you think about founders and deciding to sell a portion of their business. Now that we are through that first 12 months, the pipeline and where we are in various conversations is obviously a little more advanced, and so we would expect the momentum to pick up a little bit. So there was a little bit of initial transaction momentum and AGF messaging in the market as we're originating relationships that just took a little bit of time on the front end.
But now that we're sort of through that first transaction, that, that does help with momentum.
With respect to pricing, it seemed to be Kensington was around maybe at 10x EBITDA. Does that any comments with respect to what you're seeing in pricing in the marketplace?
Yeah, for sure. So, from a manager perspective, we obviously saw a peak in pricing, call it 18-24 months ago. And I think as everyone's aware, headwinds in fundraising, interest rate impacts on performance have obviously had an impact and sort of brought down what I would call, irrational exuberance, perhaps from 2021, early 2022. There are still pockets of the market where, things like, you know, U.S.-based or global private credit managers that are still, getting pretty premium pricing. But we are seeing more, I'll call it rational and realistic pricing levels in the market today.
Okay. Thanks for that color.
Thank you, and one moment for our next question. And again, ladies and gentlemen, if you have a question at this time, please press star one one. And our next question comes from the line of Rasib Bhanji with TD Securities. Your line is open. Please go ahead.
... Thank you. If I could continue on with the alternatives team. So you have infrastructure, private credit, and now mid-market Private Equity. Could you remind us what sectors or capabilities or even geographies within private alternatives are you targeting for now?
Hi, it's, it's Ash here. I'll take that. So, when we restarted our strategy, as I was describing earlier, we were really focused on private credit, which we have on our platform, and potentially expanding that to south of the border. Mid-market private equity, with the Kensington transaction was on our list of priorities. We are also looking at various liquid alternative strategies as well. From a geographic perspective, we are focused on managers in North America. Their strategies could span to other parts of the globe. We are generally looking, though, at North American and European strategies and North American-based managers. Again, as I mentioned before, we're looking at, I'll call it smaller to mid-size alternative managers.
Okay, that's fair. And then on Kensington specifically, I think one of your prepared comments was that you'll support Kensington through your distribution network and the size and scale of AGF. Could you give more color on that, specifically? And, what will Kensington have access to now with AGF that they didn't have access to before?
Yeah, for sure. I'll take that one as well. So again, our value proposition and the environment with which alternative managers that are smaller, mid-size, are looking at today, especially with things like fundraising headwinds, mean that infrastructure support systems and resources are starting to become more of a factor versus, again, I'll just use 2021 as an example, when the fundraising story was quite different in terms of level of effort required. The fundraising model in the retail and high net worth sector in Canada is generally a pretty targeted SWAT team approach, and Kensington has done a fabulous job, quite frankly, of targeting those investors in that sector, that are investing in private capital vehicles.
I think how we see ourselves helping them is you take that, I'll call it SWAT team approach to targeted fundraising, and then put a robustness of infrastructure and resources behind it, that otherwise, in a small firm, you wouldn't have the cost structure to build behind them. And that could be everything from CRM systems to introduction capabilities with our far broader network. It could also span over into the institutional world, which is a space that I think Kensington has some growth prospects as well. So it is really adding that support, robustness, and resources behind what is already quite a successful business.
Yeah, and I'd add one thing on this, which is, I think there are also... As you know, we've talked on previous calls about our, within retail, our effort to really target these larger IIROC books and the extent that we have a relationship there, that can help, further penetrate what Kensington does. I think that creates some, what I call a revenue synergy, if you will, between the two firms.
Okay, understood. And just my last question on, on the retail side, redemptions on mutual funds. Would you be able to give more color on whether those redemptions are more broad-based, or if they're within specific, strategies or distribution channels? Any more color over there would be helpful. Thank you.
Yeah, maybe I'll start, and maybe, Judy, you can follow on that, which is, you know, think about it this way. We serve multiple segments or channels of consumers, right? Where we're seeing it is really on the lower income, middle income families. It looks to be stabilizing, but people are paying using savings to pay their bills still. It's not getting worse, but it looks to be stabilizing. At the higher end of our channels, where people have larger wealth amounts, we're seeing less of that. So again, it feels like hardship when we look through the different components of the end buyer or the end investor.
Okay, thank you.
Thank you. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. AGF's next earnings call will take place on April 4, 2024. You may now disconnect.