Investment thesis
• We expect AUM growth rates to continue a slowing trend in 2008. After experiencing above-average growth for several years, industry growth slowed significantly in 2007. We expect a slight pickup in 2008, but below levels seen between 2003 and 2006.
• Valuation remains above the historical lows. Despite severe pullbacks in asset manager share prices, valuation is still above historical lows, most of which were set in the post-tech bubble period. At this stage, our approach to valuation contemplates valuation multiple stability. In light of the current equity market environment, this is arguably an optimistic stance.
• Primary risks are equity market sensitivity and intensification of industry competition. The latter is most obviously being expressed through mounting pressure on firms to reduce management expense ratios. Against this backdrop, companies with scale and a broad distribution strategy are best positioned.
• Our preference is towards companies offering the most defensive characteristics. We emphasize scale, high margins, broad distribution, and a combination of a well-balanced product lineup with good performance. IGM Financial (IGM), in our opinion, best reflects this defensive theme.
• Consolidation: Lack of willing sellers. While consolidation remains an important theme for this space, we do not foresee any large transactions taking place in the near term. Dundee’s recent decision to reject the sales process is further evidence that potential sellers are not a willing bunch.
We are initiating coverage on the following companies:
• AGF Management (AGF.B-T): HOLD-rating; $29.00 price target
• CI Financial Income Fund (CIX.un-T): HOLD-rating; $26.00 price target
• DundeeWealth (DW-T): HOLD-rating; $15.00 price target
• IGM Financial (IGM-T): BUY-rating; $57.50 price target

Table of contents
Executive summary...............................................................................................................................3
Investment summaries.......................................................................................................................3
Slowing industry growth offset by cash flow stability.................................................................................5
Valuation and performance....................................................................................................................8
EV/EBITDA: The pillar for this sector....................................................................................................8
Valuation is closer to historical averages...............................................................................................8
A note on P/E....................................................................................................................................9
Performance: Asset managers have underperformed recently...............................................................10
Key fundamental factors in today’s market environment..........................................................................12
Distribution: Breadth matters.............................................................................................................12
Fund flows favour balanced investing.................................................................................................13
Performance matters. How does each firm fare?..................................................................................14
Scale: Effective tool for margin preservation.......................................................................................16
Consolidation: Lack of willing sellers......................................................................................................17
M&A valuation overview....................................................................................................................17
Primary threats...................................................................................................................................19
Equity market sensitivity....................................................................................................................19
Intensifying pressure on MERs...........................................................................................................20
Concentration of sales.......................................................................................................................22
Rising power of the banks.................................................................................................................23
Comparing the Canadian asset managers...............................................................................................25
AGF Management Ltd...........................................................................................................................26
Investment summary........................................................................................................................26
Company overview..........................................................................................................................26
Positive fundamentals and catalysts...................................................................................................27
Risks to consider.............................................................................................................................30
Valuation........................................................................................................................................31
CI Financial Income Fund.....................................................................................................................34
Investment summary........................................................................................................................34
Company overview..........................................................................................................................34
Positive fundamentals and catalysts...................................................................................................35
Risks to consider.............................................................................................................................37
Valuation........................................................................................................................................39
Dundee Wealth Management Inc...........................................................................................................42
Investment summary........................................................................................................................42
Company overview..........................................................................................................................42
Positive fundamentals and catalysts...................................................................................................44
Risks to consider.............................................................................................................................45
Valuation........................................................................................................................................47
IGM Financial Inc................................................................................................................................49
Investment summary........................................................................................................................49
Company overview..........................................................................................................................49
Positive fundamentals and catalysts...................................................................................................50
Risks to consider.............................................................................................................................53
Valuation........................................................................................................................................55
Appendix 1: Fund performance statistics, by company............................................................................58