CI Financial Corp. experienced redemptions of $1.3 billion in its Canadian retail asset management business in the first quarter, due primarily to outflows from balanced funds and cash-like products, the Toronto-based firm reported in its first quarter earnings release on Friday.
The outflows compared to $397 million in redemptions in the fourth quarter, and $841 million in net inflows in the first quarter of 2023.
In a conference call, CI Financial CEO Kurt MacAlpine ascribed the outflows to the fact that 40% of CI’s retail assets were in balanced products, the category with the highest redemptions across the industry in the quarter, and to investors slowing their allocations to cash-like products as they anticipated rate cuts.
According to the Investment Funds Institute of Canada, balanced mutual funds experienced $8.1 billion in outflows through the first quarter of 2024, while balanced ETFs experienced $1.3 billion in inflows.
MacAlpine also said the first quarter was normally a slower flow period for the firm.
“We’re not a bank; we don’t benefit from the in-branch seasonality of RRSP investments,” said MacAlpine in a response to an analyst question. “And unlike some of our insurance peers, we don’t have a retirement platform where you typically see spikes in RRSP investments in and around bonus season.”
Nevertheless, assets under management in the Canadian segment increased based on market performance, rising to $130 billion in Q1 from $125 billion in the previous quarter and $122 billion in the same quarter last year.
During the call, MacAlpine said the investment performance of the firm’s asset management business remained strong, with “nearly three quarters of our AUM outperforming our peers on a three-year basis.”
In 2021, CI began consolidating several legacy fund-management boutiques onto a single platform. It has also consolidated similar investment products and introduced new ones, notably in alternative investments. Earlier this week, the firm launched the CI Global Artificial Intelligence ETF.
CI Financial reported a net loss of $154.4 million in the first quarter, compared to a net loss of $63.5 million in the previous quarter. Total net revenues were $645.7 million in the first quarter, down from $715.6 million in the fourth quarter, while total expenses increased to $768.3 million from $753.7 million in the fourth quarter.
CI’s total debt at the end of the first quarter stood at $3.6 billion, up from $3.5 billion in the previous quarter, which includes $235 million in mergers and acquisition obligations to Corient, its standalone Miami-based U.S. wealth management arm.
CI said that the obligations to Corient would be satisfied by January 2025.
On April 22, Moody’s Ratings downgraded CI’s long-term issuer and senior unsecured debt ratings from Baa2 to Baa3 due to the firm’s “elevated acquisition-related liabilities and share repurchase activities.”
“We’re very, very comfortable with the debt levels that we have in place today,” MacAlpine said in response to an analyst question. “We believe the opportunity to buy our shares, given where we’re trading, is much more accretive for our shareholders than not buying shares.”
In February, Corient obtained an A- independent credit rating from Kroll Bond Ratings Agency.
“The U.S. [business] will be in a strong position to take on third-party debt if we choose,” MacAlpine said. “Establishing access to independent Corient debt in the near term will help facilitate inorganic growth opportunities.”
CI’s total global assets was $474 billion, up 7% from the previous quarter.
The firm also declared a quarterly dividend of $0.20 per share.