Merrill bullish on the Investors Group

“We would argue that the power of Investors Group’s distribution force is not limited to mutual funds, insurance, mortgages and GICs,” states a recent Merrill report. It notes that assets under administration at IG Securities are now over $2 billion and it sees strong growth potential there as IG reps convert client assets to IG products. Over the next two
years Merrill expects that IG’s securities business could grow to $6 billion, with another $1.7 million flooding into IG products.

Merrill is maintaining its buy rating on the firm, noting that it trades at about a 50% discount to its peers despite continued strong results.

Apart from the growth on the securities side Merrill also likes IG’s co-branding strategy, which recently saw it sign up Fidelity Investments Canada as a new partner. Merrill notes that IG breaks even on these deals or even adds margin by charging higher management fees on the co-branded products. Although it pays the manager an institutional fee and a brand premium, the higher fees shift that cost to unitholders.