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IGM Financial Inc. IGM-T chief executive officer James O’Sullivan remains cautious for 2023 after a year in which asset managers had to battle rocky equity markets that affected several asset classes simultaneously, dragging down revenue.

IGM Financial reported a drop in its fourth-quarter net earnings to $225-million or 94 cents a share, compared with $269-million or $1.11 in the fourth quarter of 2021. Total revenue for the quarter was $848-million, down from $912-million.

The company’s total net earnings for the full year fell to $867-million in 2022 from $978-million in the year prior.

The investment giant, a subsidiary of Power Corp. of Canada POW-T, manages about $249-billion in assets and its operations include IG Wealth Management, Investment Planning Counsel and Mackenzie Investments.

Mr. O’Sullivan said while it was “a tough year for both clients and advisers,” with “unusual markets” affecting company earnings, he was proud of how quickly his team was able to pivot to help stem deeper losses.

“When it became clear in March and April of last year that we might have a full-on bear market, we really trimmed our sails and looked at the potential decline in revenue,” Mr. O’Sullivan said in an interview. “We said we have to run our business a bit different here – and right away we looked to cut the things we can control, such as expenses.”

Almost half of the company’s net earnings come from IGM’s wealth management division, which recorded $107.9-million in net earnings for the quarter, a 26.7-per-cent drop from the fourth quarter in 2021. Despite volatile markets that have shaken investors’ confidence, IG Wealth Management – which has more than 3,200 financial advisers and associates – managed to maintain positive sales for the ninth consecutive quarter, bringing in $429-million.

It is a segment that typically has more stable assets, Mr. O’Sullivan said, with many clients working with investments advisers and following financial plans with monthly contributions. But much of that is sitting in cash as investors look to rebuild confidence in markets.

“Clearly that reflects the higher rates available on cash but more importantly, there’s a hesitation out there among investors,” he added. “But we’re all starting to see light at the end of a dark tunnel. I think certainly in Canada, we may have seen peak inflation, I hope we’ve seen peak policy rates and I think we’re starting to see bond markets settle down. Those are all necessary preconditions for a better investing environment.”

The company’s asset management division – which includes Mackenzie Financial – did not fare as well on the sales side as its wealth management counterpart.

Similar to many asset managers in the country, Mackenzie was hit with redemptions in the fourth quarter – with $832-million of investor money exiting investment funds. That compares to $757-million in net sales in the same quarter of 2021.

Canaccord Genuity analyst Scott Chan said in a research note that he expects sales at Mackenzie to increase in 2023 with funds “improving relative performance and strength in key product categories, such as sustainability, dividend income, Canadian equities and income-oriented funds.”

Some of the decline was offset by IGM Financial’s majority stake in private-equity firm Northleaf Capital Partners, as well as the company’s ownership in China Asset Management Co. Ltd.

While not included in reported sales numbers, Northleaf brought in more than $3.8-billion in sales in 2022.

Northleaf, in which IGM has a 56-per-cent ownership stake, provides retail clients access to alternative investments, such as infrastructure and private credit.

Last month, Mackenzie Investment increased its equity ownership in China AMC to 27.8 per cent, up from 13.9 per cent. While the partnership only accounted for 2 per cent of revenue as of December, 2022, it is an area that has future growth potential for the company, said Mackenzie CEO Luke Gould.

Mr. Gould said the recent reopening of China’s border – which will positively affect the overall economy and investment sales – will allow the investment team to resume face-to-face interaction with China AMC in 2023, as opposed to virtual meetings.

“We believe Canadians and North Americans should have more exposure to China in their portfolios. That’s only going to become more relevant over time,” Mr. Gould said during an analysts call on Friday.

“We have a lot of doors open for us in Asia that we wouldn’t otherwise have absent this investment,” Mr. Gould said. “So we’re really staying the course. This is a secular investment for us, and that collaboration between the companies is very important to us.”

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