Thank you, Betsy. Good morning, everyone, and welcome to today's call. Joining me on the call today, we have James O'Sullivan, President and CEO, IGM Financial; Damon Murchison, President and CEO, IG Wealth Management; Luke Gould, President and CEO, Mackenzie Investments; and Keith Potter, Executive Vice President and CFO, IGM Financial. Before we get started, I would like to draw your attention to our cautions concerning forward-looking statements on slide three of the presentation. Slides four and five summarize non-IFRS financial measures and other financial measures used in the material.
On slide six, we provide a list of documents that are available on our website related to IGM's Q4 results. I'll take us to slide nine and turn it over to James.
Thank you, Kyle, and good morning, everyone. During 2024, we continued to execute on our growth strategy at IGM Financial with important progress and success across all our businesses. We achieved adjusted EPS of CAD 3.95 up 12% relative to 2023, and our second highest year on record, and we returned over CAD 650 million of capital to shareholders through our common dividend and share repurchase program. We grew our client assets, including our proportionate share for strategic investments, by 24%, reaching over CAD 480 billion at the end of the year.
Our core businesses, IG Wealth and Mackenzie, made up a large portion of our growth in assets and drove the majority of our earnings growth in the year, demonstrating the strength of our core. Our strategic investments also delivered strong client asset growth, including significant new inflows across each of the four businesses. We have the businesses that we want, and 2024 results support our belief that we are well-positioned and have architected IGM to deliver growth. Turning to slide 10, as we look ahead to 2025, we will continue to invest in our wealth and asset management businesses, building on recent success and supporting their long-term growth.
At IG Wealth Management, we will leverage our leading advisor platform and strong momentum to drive further gains in the mass affluent and high-net-worth segments. And Mackenzie remains focused on delivering investment excellence, leveraging and expanding our distribution advantage, and elevating the client and advisor experience. We will continue to return capital to shareholders with our strong dividend and share repurchase program. And as we've said for over a year, from an M&A perspective, we expect to be most focused on investing in the strategic investments that we own today.
Shifting to our fourth quarter results on slide 11, Adjusted EPS of CAD 1.05 was up 22% relative to the prior year and was the second-best fourth quarter on record. Quarter-ending assets at each of our wealth and asset management companies reached record period-ending highs. During the fourth quarter, we renewed our Normal Course Issuer Bid and continued returning capital to shareholders. During the quarter, IGM Financial was once again recognized as a top sustainable company, as well as one of Canada's top employers. We are proud of these awards and view them as a reflection of the dedication and commitment that our employees deliver each and every day.
Turning to slide 12, financial markets remained strong throughout 2024, with positive returns in all major equity markets. IG and Mackenzie's average client return, which represents our diversified asset mix across global asset classes and currency exposures, was an impressive 15.5% for the year. As shown on slide 13, the industry backdrop clearly improved during 2024, helped by strong financial markets that supported investor confidence as the bite of high inflation and interest rates began to ease. Absent financial market volatility, we would expect 2025 to show continued improvement.
But the prospect of volatility is real and has been experienced this week with the announcement and then delay of tariffs on Canada and Mexico. Across IGM, we are prepared for uncertainty surrounding how the U.S. chooses to engage with Canada and the rest of the world and the potential financial impact, market volatility that may come from it. Our client assets are well-diversified, and our clients will continue to benefit from our focus on financial planning and advice. IGM also benefits from a range of growth drivers, both within our core businesses and our strategic investments.
Which continue to position us for near and long-term success. Keith will speak more to our earnings results later in the call. So on slide 14, I'll just quickly highlight that IGM's double-digit earnings growth for the quarter and the year were both driven by the wealth and asset management segments. And on slide 15, we see how each of the six wealth and asset management businesses contributed to IGM's asset growth over the course of 2024, which Damon and Luke will each speak to next. So Damon, over to you.
Thank you, James, and good morning, everyone. Turn to slide 17 in Wealth Management's fourth quarter highlights, including IG Wealth, Rockefeller, and Wealthsimple. During the quarter, we saw record high ending AUM and AUA, as well as fourth quarter records for total gross inflows, total sales, and inflows from existing clients. The fourth quarter set another all-time record for inflows for new clients. IG Wealth ended the quarter with AUA of CAD 140.4 billion, up a solid 16% year-over-year and 2.9% during the fourth quarter, driven by financial markets. Gross inflows from the fourth quarter were CAD 3.9 billion, with gross sales into IGM products at CAD 3.8 billion.
Net inflows from the quarter were CAD 553 million, and net sales into IGM product were CAD 384 million. January was a strong month, ending with a record AUM and AUA, record gross inflows, and record gross sales as we continued momentum we started in the second half of 2024. Total gross inflows from newly acquired clients were CAD 1.3 billion, with clients with more than 250,000 in financial assets representing 78% of these flows. During the quarter, we elevated our advice experience by giving our advisors and clients access to a leading-edge estate planning, settlement, and executive services platform through our strategic partnership with ClearEstate, a leading fintech estate planning provider.
Also during the quarter, we ranked number one in earned media share of voice in the Canadian wealth marketplace. During 2024, IG was the most prominent wealth brand for earned media share of voice among both independent firms and bank-based wealth advisors. This ranking confirms our voice is being heard by both our current and prospective clients as we share our views on leading financial planning and investment topics. This further validates that our thought leadership and best-in-class advice platform is resonating in the marketplace. Both Rockefeller and Wealthsimple had strong quarters, and I'll speak to both in coming slides.
Turn to slide 18. You can see IG's Q4 flows. As you can see on the left, in January and the fourth quarter, and in 2024, we delivered strong gross inflows, with both fourth quarter and 2024 being records for IG. On the right-hand side is our last 12-month net flows. As you can see, all lines are moving solidly in the right direction as IGM product net flows returned to positive territory and approached total net flows. As we move through 2025, our advisors will continue to build on the investments we've made and extend our momentum as we work with our clients to both build, quantify, preserve, and distribute wealth.
Turn to slide 19. I'll make two brief comments here. On the top left, you will see a strong increase in gross inflows, which were up 27% during the quarter, and once again complemented by a year-over-year decrease in our gross outflows rate. On the bottom right, you can see a continued upward trend in our 2024 net flows rate, which returned to positive territory during the fourth quarter.
Turn to slide 20. In 2024, our gross inflows from newly acquired clients exceeded CAD 1 billion per quarter on average, while new clients with more than CAD 250,000 in financial assets have represented over three-quarters of those flows over that same period. These solid gross inflows have helped contribute to our AUA for clients with over CAD 250,000 in financial assets, which now stands in excess of CAD 117 billion, while clients with financial assets greater than CAD 1 million represent 44% of our total AUA, which is up 38% from a year ago.
Turn to slide 21, and our strong momentum in mortgage and insurance. Two quick points I'll make on this slide. One, our mortgage funding was up 17% during 2024, a strong result given the heightened competition and sluggish growth in this market. And two, along with the strong growth in new annualized insurance premiums of 31%, I'll also highlight that both our average case size and the number of cases were up in 2024. We have more advisors selling insurance, and our advisors selling larger policies as we go up market.
Turn to slide 22 and an update on how we intend to capitalize on the industry's key wealth drivers. Our partnership with ClearEstate provides multiple opportunities to further address these drivers, and our conviction in these opportunities is supported by our minority investment in this company. Half of Canadians do not have a will, and those that do, approximately one-third, need to have their estate plans and the will updated. ClearEstate's intuitive, state-of-the-art platform is a key market differentiator that can help us further address the financial needs of mass affluent and high-net-worth Canadians.
Access to a leading-edge estate planning, settlement, and execution services can give our advisors a complete view of our clients' wealth, providing opportunities for share of wallet growth and insurance protection while helping clients bulletproof and execute their financial plans as they prepare for wealth transfer to the next generation. This partnership will further extend our best-in-class advice platform. Turn to slide 23. Some updates on Rockefeller's progress. Client assets were up 24% during 2024, driven by inorganic and organic growth, as well as capital markets.
Organic growth drove CAD 6.6 billion in client assets in 2024, while Rockefeller continues to add to their private advisor network, with 54 new advisors being added in 2024. Turn to slide 24. It was another record-setting quarter of AUA growth at Wealthsimple. Wealthsimple AUA increased by CAD 11.9 billion during the quarter, yet another new quarterly record, with assets ending in 2024 up an absurd 106%. With that, I'll turn over to Luke Gould.
Thank you, Damon. Good morning, everyone. On page 26, you'll see a few highlights for Mackenzie and asset management for the quarter. Record quarter-end high AUM of CAD 213 billion is up 9% versus last year and approximately 1% in the quarter, driven by client returns. Investment fund net redemptions of CAD 377 million in the quarter were a significant improvement relative to the CAD 826 million last year. And January continued this trend, with net redemptions of CAD 65 million improved from CAD 172 million last January.
In the top right, I'd highlight that we had some meaningful institutional wins of around CAD 4 billion in aggregate, which are expected to fund during February and March. I'll speak a bit to this in coming slides and would note here that they primarily relate to our Global Quantitative Equity Team, and they are diversified across mandates, client types, and geographies. I'd also highlight that we continue to scale our Mackenzie Northleaf private asset products for retail with over CAD 300 million at year-end. The products have had very strong performance, and we're going to continue our focus in 2025 in bringing these important asset classes to retail investors.
Also noteworthy, you can see that we launched a U.S. Small Cap Fund managed by our Quant team, as well as two liquid funds, our Mackenzie Global Dividend Enhanced Yield and Enhanced Yield Plus funds. These funds are managed by our Global Equity & Income team and use an option-writing strategy to enhance income while reducing volatility. We've also highlighted that we've launched our U.S. All Cap Growth Fund to our Primerica Future Path Fund family. This fund is a five-star mandate that we're excited to bring to Primerica.
At the bottom, you can see ChinaA MC had strong growth during 2024, with long-term investment fund assets up 42% and market share increases from 5.1% to 6.2%, largely as a result of strong net sales of CNY 225 billion, or CAD 45 billion . And Northleaf continued its consistent trend of new commitments of around CAD 1 billion per quarter in each quarter since our partnership began four years ago, and they had just under CAD 5 billion in new commitments in 2024, diversified across private equity, private credit, and infrastructure offerings. Turning to page 27, you can see the trend in the history of Mackenzie's net flows.
As mentioned, we've continued to see year-over-year sales improvements, and our gross sales are up 26% in Q4, and these improvements have continued in January in the context of a continued improving industry environment. Redemption rates are stable, and on the right, you can see this is translated into improving net sales. On page 28, at the top, you can see that retail gross sales were up 24% from last year, and Morningstar ratings overall were relatively unchanged from September. In the table at the bottom left, you can see improvements across client segments in the quarter.
Turning to page 29, here you can see our performance and net sales for our retail mutual funds and ETFs by boutique, as we've spoken to over prior quarters. In the current environment, we're seeing short-term relative underperformance in our Bluewater Growth and Greenchip boutiques. These teams continue to manage in line with their proven approaches. Across all of our other boutiques, we continue to see improvement in net sales on a year-over-year basis, and in our Quant and Global Equity and Income boutiques, they continue to deliver compelling performance within large product categories, and we're seeing growing positive net sales.
We're also seeing improved net sales within our fixed income ETF mandates and have a very strong U.S. All Cap Growth mandate advised by Putnam that we're going to be continuing to emphasize in 2025.
Turning to page 30, we're turning a spotlight on our Global Equity boutique, which we last profiled at our investor day about a year and a half ago. This team was added in 2017, and over the seven years, they've built exceptional track records across 25 mandates using their holistic Quant approach, promoting all-weather, risk-adjusted outperformance across cycles and environments. The team is now managing over CAD 13 billion, diversified across client types, and pro forma for recent awards, they're at CAD 17 billion. On the top right, we've highlighted the early and growing momentum we're seeing in retail under the banner of trailblazing Quant in Canadian retail.
We've launched nine new mutual funds and ETFs for this Quant team in retail in 2024, and we have another four coming in early 2025. And in retail, we've had net sales of just over CAD 500 million in 2024, and we see significant upside here with regards to the large categories these mandates compete in. We've also highlighted in the bottom right the CAD 4 billion in partnership and institutional awards they're funding in early 2025. As mentioned, these awards are across five different mandates, diversified across client type and geographies.
I'd also highlight that our Quant approach is really well-suited to customization to client needs, and we're very pleased with the pipelines we have here as we enter 2025. I'd also highlight before Keith takes it, I'd remind that these wins, this CAD 4 billion, these are large blocks of business. And so when you think about pricing, on page 40, we've got the trending of our fee rates, and you can expect these to be obviously higher than the fee rates at IG and Canada Life, but lower than the average third-party fees that we enjoy. Going to page 31, a few comments on the Chinese investment fund industry.
On the left side, the fourth quarter exhibited modest net flows, driven almost entirely by money market funds. Industry long-term assets were flat during the quarter and up 17% year-over-year, driven by both market and strong net flows during the year. On the right, I'd remind and highlight that ChinaA MC's position remains very strong as the second largest fund manager in terms of both long-term and investment funds, and they did experience market share gains in both long-term funds and overall in the past year.
On page 32, you can see continued growth in ChinaA MC AUM, with year-over-year long-term investment fund AUM up 42%, more than twice the industry rate, due to strong net sales of CNY 225 billion, or CNY 45 billion over the last 12 months. I'd also highlight the growth of 5% overall relative to Q3. ChinaA MC is a leader in ETFs in the Chinese marketplace, and in this space, they enjoy a market share of 17%. We did announce in these materials that during the fourth quarter, to ensure ongoing competitiveness and market share leads, ChinaA MC made pricing changes across a series of broad market ETFs, and this represented about 40% of their long-term mutual fund assets.
We're very supportive of these changes and believe it positions ChinaA MC well to continue its leading position and to capture ongoing growth in this space. The impact of these fee changes was included in the fourth quarter, half of which was included in the fourth quarter, and Keith's going to provide more detail and an outlook on a later slide. On page 33, you can see another quarter of strong growth at Northleaf, with CAD 0.9 billion in new commitments in the quarter CAD 4.9 billion over 2024. One noteworthy item I'd highlight is that 2024 was a milestone year for Northleaf in expanding their distribution reach globally.
This reflected the first year where a majority of their new third-party commitments were from clientele outside of Canada, and we're really pleased to see these efforts in them executing on their strategy. As mentioned earlier, the fundraising during the quarter and year was across infrastructure, private credit, and private equity, and we're pleased for this continued strong growth. I'll now turn the call over to Keith Potter.
Thank you, Luke, and good morning, everyone. On slide 35, you can see key highlights for Q4. Adjusted EPS was CAD 1.05, up 22% year-over-year, our second highest fourth quarter on record, and it's driven by strong results at both IG and Mackenzie. We returned a total of CAD 180 million to shareholders in the quarter. In addition to the quarterly dividend, we continue to be active with our NCIB program, repurchasing CAD 47 million in shares. As noted by James, we have renewed our NCIB during the quarter. Our operations and support business development expense growth over 2023 came in at 3.8% versus our guidance of 4%. We are guiding to 2025 expense growth of 4%.
I'll speak to this in a moment. Turning to slide 36, you can see our AUM and AUA flows. As seen on the left-hand side, 2024 was a solid year for asset growth, with ending assets up 12.6% year-over-year, 2.1% in the fourth quarter, and during 2024, average assets were up 10%. January saw continued solid growth, with ending assets at an all-time high of CAD 278.1 billion. Turning to slide 37, as I mentioned, we have our consolidated earnings of 22% year-over-year, 2% sequentially, driven by our wealth and asset management businesses. On slide 38, we present the key profitability drivers for IG Wealth, and I'll highlight a few points here.
On the left-hand side, you can see that average AUM and AUA was up 4.8% over last quarter, driven by investment returns and net inflows. And on the right, the advisory fee rate is in line with our guidance and reflects market returns during the period as clients moved up wealth bands. Looking into 2025, we continue to expect about 0.5 basis point downward pressure on the rate per quarter, driven by a mix shift toward high-net-worth and mass affluent clients. This rate may also be impacted by product mix shifts such as cash and cash-like deposits. Products and program fees remain stable, and we expect this trend to continue moving forward.
Finally, asset-based compensation rate was up during the quarter, and as we move into Q1, we do expect this rate to come down and be closer to Q3 levels, driven by our annual grid reset. On slide 39, IG's overall earnings were CAD 135.3 million in Q4, up 33% year-over-year and 7.8% sequentially. On AUA, advisor and product program fees are up year-over-year relative to last quarter, driven by asset growth. On 0.2, other financial planning revenues reflect strong performance in our insurance business and mortgage results that were in line with our expectations.
And looking forward, we continue to expect the mortgage business to contribute CAD 68 million per quarter, and that would be excluding the impact of any fair value adjustments. And the insurance business, we expect continued growth. Moving to slide 40, we have Mackenzie's AUM by client and product type, as well as net revenue rates. On the left, you can see average AUM was up 3.1%. And on the right, we continue to see strength in our wealth management partnerships, contributing to a mix shift in third-party rate, excluding Canada Life, while the overall rate remained relatively flat versus last quarter.
As a reminder, as we look forward to Q1, we have two fewer days upon which we charge revenues. However, our asset-based compensation paid to distributors and advisors is based upon one quarter of the year, and the combination of the two will have a negative impact on our revenue rate in Q1. Just for some context, historically, in Q1, this has had approximately a 0.3 basis point impact on that rate. Turning to slide 41, you can see Mackenzie's earnings of CAD 61.9 million, up 25% year-over-year and 4.2% sequentially. Year-over-year and relative to Q3, net asset management fees were up, driven by higher assets.
Up 0.2%, higher net investment income was primarily driven by seed capital returns. Turning to slide 42, we are guiding to 4% growth in operations and support and business development in 2024. With respect to IG, we've made meaningful investments in the business over the past several years, and during 2025, we will leverage the momentum we are seeing. Our investments will build out our advisor technology leadership, enhance our segment advice model, and build out solutions focused on key wealth drivers that Damon spoke to.
IG expense growth of approximately 2.5% also recognizes the efficiencies we have gained through real estate optimization and decommissioning old systems and processes that we've replaced with new technologies. Mackenzie's expense growth of 6% will drive progress on a number of fronts during 2025, including client and advisor experience through enhancements to the back office, advisor portal, and other technologies, investment management through mid-office platform development, and investments in distribution and product capabilities. Slide 43 has ChinaA MC results.
First, on the left, AUM increased by 4.5% versus last quarter. And on the right, you can see ChinaA MC's earnings of CAD 25.4 million for the fourth quarter. I have three main points here relative to Q3. First, as I spoke to on last quarter, there were significant seed capital gains in Q3, and excluding these one-time items, Q3 earnings would have been more in line with Q2 of about CAD 28 million. Second, as we look to Q4 results, earnings were lower as well due to seasonality of higher expenses. And then finally, as Luke mentioned, in the quarter, mid-November, ChinaA MC did announce fee reductions on broad-based market ETFs, which impacted earnings.
And these changes were made to better service clients, enhance the company's number one position in the ETFs, and capture future growth. As we look forward to 2025, our best estimate is that we expect full-year earnings to be aligned with 2024. Slide 44 has the earnings contribution from the companies in each segment. A couple of comments on strategic investments. First, Rockefeller had strong performance through its core global family office business during the quarter. It was offset somewhat by lower earnings in asset management and investment banking segments.
Northleaf's earnings of CAD 3.1 million reflect continued investment in the business to globalize its distribution and reach its clientele. As a reminder, the Q4 2023 comparative period has a positive one-time adjustment for a lower effective tax rate in this quarter. It actually had a negative adjustment on the tax rate. Slide 45 provides a summary view of earnings and the ownership and value of our strategic investments by segment. The first main point is that the carrying value of Northleaf increased in the quarter, reflecting earnings, and the change in the fair value estimate of the earnout related to our 2020 purchase transaction.
The estimate net of non-controlling interest is CAD 32 million, which you can reference in the notes to the financial statements. And just to be clear, the earnout is capitalized in adjustment to cost and does not have an impact on earnings. And finally, at the end of Q4, our strategic investments now represent CAD 6.2 billion in value. Slide 46 highlights execution against our capital allocation priorities. Our 12-month trailing dividend payout ratio is 64% of adjusted cash earnings at the end of the quarter. And we've added a slide in the appendix with details of the calculation.
We continued to execute on our share repurchases during the quarter while maintaining our financial flexibility. And IGM's leverage ended 2024 at 1.6 times debt to EBITDA and unallocated capital increased to CAD 531 million. That concludes my remarks, and I'll turn it over for questions.
We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Nick Priebe with CIBC. Please go ahead.
Yeah, thanks. Just wanted to go back to the remarks about pricing changes that were enacted at China AMC in the quarter. Just a couple of questions on that. One, was that driven by competitive considerations as opposed to any further regulatory action? And two, are you able to quantify the expected impact on run rate earnings to China AMC?
Yeah, it's Luke, Nick. Yeah, I'll say on those two dimensions. One, those are competitive changes. And so again, to retain their leading market share position, they want to make sure that their prices are competitive and in line with all those others competing. So that was the nature of them. On the magnitude, you could expect for Q1 earnings just down very slightly from Q4. And so I think Keith gave full year guidance that 2025 should see earnings full year in line with 2024's and then continue growth beyond. So you shouldn't expect material changes.
Yeah, Nick, just a different piece here just adding to that. Just on page 41, you can kind of expect a pattern of what we'd expect similar to Q4 from 2023 as we move through the year.
Okay. And then I also want to drill into the economics attached to AUA growth at Wealthsimple. Very strong quarter and a very strong year. But can you just expand a bit on how balanced that growth is across product lines? And I guess what I'm really trying to understand is whether the revenue growth has been essentially commensurate with the asset growth.
Yeah, it's James. Like most growth companies, what I observe is companies often start by focusing on growth in clients and then growth in assets, growth in revenue, growth in EBITDA, and ultimately, kind of it reveals itself in growth in IFRS earnings. Wealthsimple is demonstrating remarkable growth in clients, in assets, in revenue, and in EBITDA. As I've described or said in previous calls, I think they are fully, fully in control of their financial future, Nick. So we're seeing growth not just in those items that we disclose quarterly, but we're seeing it right down through EBITDA.
Okay, very good. And just last one for me, just a quick point of clarification. I think there was a comment made on the economics attached to the CAD 4 billion of mandate wins that will be funded in the future months. And I think the comment, if I caught it correctly, was that the economics attached to those would be somewhere between the Canada Life fee rates and the overall third-party fee rates at Mackenzie. So that would put it somewhere between 15 basis points and 50 basis points. Did I catch that correctly?
Guys, Luke, yeah, you sure did. So you can think of Canada Life and IG and the rates they enjoy based upon the scale of their business with Mackenzie as being kind of a floor. And these are large institutional mandates. So in that range of kind of 50 to 16, you can think of it being closer to the 16 than to the 50 in line with what these mandates are with these large institutions.
Got it. Okay, that makes sense. All right, that's it for me. I'll pass the line. Thank you.
The next question comes from Tom MacKinnon with BMO. Please go ahead.
Yeah, thanks. First question just with respect to the buybacks. It's 3 million share buyback fully utilized, and that was offset any kind of potential dilution from option exercises. So no change in share count. You've upped it now to CAD 5 million. Is the thinking here that this would be more than needed to offset any dilution from option exercising, and you'd actually fully utilize this and possibly decrease the share count going forward? And I have a follow-up. Thanks.
Yeah, that's Tom. It's James. That's exactly what I'd like to see us do. As you notice, we now disclose quarterly and annually the capital that we return to shareholders, which is the sum obviously of the dividend and the share buyback. And I would very much like to see that number increase. And we've also disclosed this quarter cash earnings, and we show the dividend and the payout ratio on a couple of different bases. And so cash earnings minus the dividend is a growing number. Unallocated capital is a growing number. And so I think we're in a position here where we have optionality. We have some flexibility.
And so as we look at a year ahead that may present some volatility, I would view that volatility as an opportunity for us to buy back more and return even more capital to shareholders in 2025 than we did in 2024.
Okay. And just with respect to the dividend, as I think you had mentioned before that if that payout ratio on cash got around 60, you'd have a look at the dividend. Thoughts there? I mean, we got volatile times. You've got flexibility with the buyback. How is your thinking there?
Yeah. I mean, as we approach that mark, and we're getting closer to be sure as that page discloses, we'll take that question, that discussion to our board. But I don't know how much more upside there is in the share price from a higher dividend relative to share buybacks. I think, again, in a world of volatility, opportunistically buying back shares, I think, is a powerful way of supporting both the share price and ongoing shareholders. So sitting here today, Tom, there's a bit of a bias towards share buybacks.
Okay, thanks for that.
The next question comes from Graham Ryding with TD Securities. Please go ahead.
Good morning. Could I just ask you to maybe just elaborate a little bit? You said you're at Mackenzie, you're looking to invest in your product and distribution capabilities, and then you're also looking to invest in your middle office solution for investment management. Can you maybe just give us some examples or further context on what that means?
Yeah, it's Luke. Absolutely. So I'll start with the middle office. And we profiled it a bit at Investor Day. So we're excited. In 2025 and 2026, we're bringing to you a multi-year program. We've been working with BNY Mellon to really provide a world-class environment for our investment teams to do the rest of the work. So that is adding some extra cost in 2025 and in 2026, which is in these numbers. And of course, those changes are meant to enhance alpha capabilities and really provide our investment professionals with the best data and the best environment to generate alpha.
The other big piece of investment we're making is really around the theme of enhancing client experience and making sure we administer a lot of plans for advisors and their clients across Canada. And we want to make sure that every touchpoint with Mackenzie is an excellent one. And so that's where the investment is happening, is primarily in the web access that advisors and clients enjoy with Mackenzie, and in the broader client experience processes to make sure every experience with us is delightful.
Okay, understood. And then there was also a reference at Mackenzie about growth within your wealth management partnerships that's having an impact on your net asset management fees. Is this a reference to growth sort of within Wealthsimple and Primerica, or is it beyond that? And is the suggestion that these are slightly lower fee mandates, so that's what's having an impact on your overall?
Yes, Luke, it was Keith who made the comment. It's Luke speaking. Yeah, it was a reflection of the strong net flows that we've had at Primerica and Wealthsimple. We've been participating in the growth of first, Wealthsimple, and second, the Primerica relationship, which we started two years ago. And because those business lines or those relationships have been growing at a faster rate than retail, that's had a consequence on the effective fee rate.
Yeah, okay. And do those flows get captured within your retail investment funds, or do they get captured within that institutional investment funds line?
Those flows, I don't know which slide you're looking at. They are in our investment fund numbers, though. And we actually do have two numbers on a bunch of the line graphs. One has retail, and one's the overall. They are in our overall investment fund numbers. And on page 28, there's a line institutional investment funds. They're included in that line.
Yeah, that was my question. Okay, perfect. That's it for me. Thank you very much.
The next question comes from Aria Samarzadeh with Jefferies. Please go ahead.
Thank you. Can you provide an update on your expectations for Rockefeller and Northleaf's earnings contribution in 2025? For Rockefeller, do you still anticipate its contribution to replace the income lost from IPC this year? And for Northleaf, could we just assume the 15% annual growth implied at your investor day?
Yeah, on Rockefeller, we expect early going into Q1 in a similar range where we're at right now and turning earnings positive in 2025. Don't know if it's going to fully replace the IPC earnings in 2025, but make progress toward that. What was the second question related to Northleaf?
Yes, for Northleaf, should we expect a 15% annual growth for their earnings as it was implied in your Investor Day?
Yeah, I think for Northleaf, if you look at this past quarter and you're going into Q1, somewhere in the range of about 5 million per quarter would be a reasonable estimate, so that's a reasonable estimate for now.
Yeah, and I would just add to those two points. First, on Rockefeller, the core wealth franchise, which is what principally attracted us to the business, is performing very, very well. They have a strategic advisory business, an M&A business, if you will, that like every M&A business on the planet these days is a bit slow. And they have an asset management business that has grown a bit slower than we might have initially expected. But I want to emphasize the core wealth franchise is performing very, very well. And so we're seeing great growth in Rockefeller, not just on the basis that we disclose in our deck, but also down to EBITDA.
And on Northleaf, I want to emphasize that Northleaf has a five-year kind of board-approved strategic plan that I'm very excited about. They want to do three things over five years. One is double their assets. Two is position the next generation of leadership within Northleaf. That business is 20 years plus, and there's a next gen that'll be assuming important roles in the coming years, and the third I would describe as finishing the globalization play. I mean, this is something that Luke spoke to a little bit, but we have been very supportive of Northleaf actually increasing their expenses in the past few years.
They've hired up. They've opened offices in Japan, in Korea, in Australia, several offices in North America and Europe, and this is increasingly a business that is global in nature, and so that's been a choice. I think the board would have had an opportunity to focus more on short-term profits, but we really want to see Northleaf positioned for success over the long term. Finishing that globalization play is a priority for Northleaf, and it's one that has our wholehearted support. To a certain extent, we should acknowledge that has been reflected in the earnings.
Okay, great. Thank you for taking my question.
The next question comes from Phil Hardie with Scotiabank. Please go ahead.
Hey, good morning. Just looking at slide 20, what do you attribute to some of the accelerated penetration of the high-net-worth clients? It looks like clients with over CAD 1 million. You contributed more than maybe 30% of growth sales last year. I guess I'm just kind of wondering, has that reached its natural share, or where do you see that going?
Yeah, Phil, it's Damon. What do we attribute to? We attribute to the fact that what we're focusing on, which is making sure that our clients can navigate the wealth drivers, and our advice platform is aligned with helping our advisors navigate those drivers for our clients. We believe our capabilities. There's an intersection between what we're providing and where there's traffic in the marketplace and where there'll be traffic in the marketplace going forward. So we're quite excited about that. It's clearly the business has momentum, and we've caught our stride. There's no doubt about that.
But when you take a look at where we are relative to where we will be in the future, our penetration of the high-net-worth space is still very, very small. So we have a very long runway here, and we're building this business to really execute against that runway. I believe that over the next five years, you're going to see significant growth at this organization in both the mass affluent and high-net-worth space.
Excellent. Maybe if I can turn it over as well. I mean, what are the opportunities for Mackenzie to capitalize on that trend, again, either directly with IG Wealth or maybe more broadly into that third-party advisor channel?
Yeah, great question. We're so fortunate to be a provider of choice and the key investment manager fueling the shelf at IG. So we're cheerleading and helping every single day to make sure that they're winning in front of their clients, and they've got the most competitive investment offering that they can possibly have to serve these client segments.
Excellent. Well, great momentum. And I think that's it for me. Thank you.
As a reminder, if you would like to ask a question, please press star and one to join the question queue. The next question comes from Jaeme Gloyn with NBF. Please go ahead.
Yeah, thanks. Good morning. Just wanted to clarify on the ChinaAMC guidance for flat growth in 2025 versus 2024. Is that entirely driven by the fee rate changes on ETF, or are there some other factors that we should be thinking about?
Yeah, it's Keith here, Jaeme. Yeah, part of it is changes to the fee rates, but there's also China AMC has demonstrated an ability to really grow their assets. They're up 35% this year. We expect strong growth next year. Maybe not in line with 35% growth, but that's also part of the story here. They're up 4.5% this past quarter with strong institutional flows, money market flows. So they're diversified, and we continue to expect strong asset growth. When you kind of net the strong asset growth, what that does to your revenue plus the fee changes, that combination, we expect earnings to be in line in 2025 with 2024.
Jaeme, it's James. I'd just add, if earnings are flat in 2025 to 2024, I'll be very pleased. I will view that as a strong result. Of course, earnings were up 9% in 2024 versus 2023. When you consider what's happened to equity markets in China top to bottom, and they've recovered somewhat clearly, and you also take into account reductions in fees for active equity as well as more recently passive products, I think for ChinaAMC to grow earnings in 2024, which they did, and to have flat earnings in 2025 overall is a really good result. It speaks principally to the quality of the franchise and the quality of the management.
We've always said it was a remarkable asset in what is currently a challenging market, and we stand by that. It's a special property.
Okay, and follow-up on the fee rates. I understand competitive versus the Chinese market. Just wanted to get a sense as to the industry as a whole. How do fee rates in China, maybe across ETF and other products, compare to global fee rates? If we look at the U.S., for example, so just trying to understand whether there's potential for more pressure in future years on those fee rates.
A good question on that it's Luke, on active equity and balanced, pro forma for the changes made about two years ago, they're competitive in retail space with global markets. On passive, the changes they just made really puts them more in line with global. Where I'd say prior to these changes, it was a bit expensive in China relative to what you'd expect, and these changes actually put it in line with, I'd say, global levels.
Okay. And then separately, thinking about the CapEx outlook and the focus for capital allocation after dividends and buybacks on reinvestment in the business and strategic investments. Obviously, we should expect some acceleration, I guess, in that CapEx. But in terms of the unallocated capital as well, is there sort of a base level of excess capital that you're looking to hold? And would increasing stakes in some of these investments be an alternative that is at the top of the list as well?
Yeah. I mean, we would probably look to hold maybe CAD 200 million of unallocated capital. I mean, we're well through that north of five, and we expect it to grow from here. So as I said earlier, I think we're sitting on a fair bit of optionality and financial flexibility. I would expect that to be expressed through we do have an ongoing program of investment in the business, and this year's levels will be similar to last year's. But I would expect us to express that flexibility through a higher level of share buybacks this year. We said in December of 2023 that we'd be focused internally for a couple of years on strengthening our core businesses, and we'd be less active in M&A.
And as we sit here today, that very much remains our outlook and our expectation. Sitting here today, I'm not expecting this to be a year of M&A. I expect it to be a year of ongoing investment in the business, support the current dividend, and do more share buybacks opportunistically.
Okay. Understood. Thank you.
The next question comes from James Shanahan with Edward Jones. Please go ahead.
Good morning, everyone. First, I wanted to say thanks for the continued excellent disclosure and transparency. It really is quite good relative to other North American asset managers, wealth management firms. That's standing. So my question as it relates to Northleaf, I think that Keith had said 5 million per quarter potentially, but I recall that there was some seasonality with regards to the earnings at Northleaf. The Q1 was often higher than other quarters due to incentive compensation. Is that still the case?
Yeah. That's right, Keith. There are incentive fees that are part of the Q1 earnings. Northleaf are also growing their AUM that will drive future quarters beyond that. But Q1 can be a little bit higher with incentive fees.
It's still on average, so $5 million per quarter is what you were guiding for?
Yeah. I'd say that would be a good estimate.
Thank you very much.
This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.
Thank you, Betsy. Thanks, everyone, again for joining us in the call this morning. Betsy, with that, we can close out today's call.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.