CI Financial – Value Trap or Opportunity?

CI Financial is a diversified wealth management firm in Canada offering global asset management and wealth management advisory services to its clients.

As one of the largest investment companies in Canada, CI Financial manages over $128 billion worth of assets and has $50 billion in assets under advisement. With more than five decades of existence, the company has successfully grown its assets in Canada and abroad and has been expanding its channels of distribution. 

CI Financial engages in the marketing and distribution of mutual funds, segregated funds, ETFs, and other investment products in Canada, and provides asset management services in Australia and New Zealand.

The company operates through two business segments, asset management (larger segment) and asset administration, through its subsidiaries CI Investments Inc., Assante Wealth Management (Canada) Ltd., CI Private Counsel LP, BBS Securities Inc., GSFM PTY Limited of Australia, and WealthBar Financial Services Inc.

It has a huge presence in North America, Australia, and New Zealand and has been expanding aggressively through acquisitions with a history of successful integrations over the years.

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Investment Data
 

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Revenue Growth & Market Exposure

CI Financial addresses diversified industries like technology, industrials, infrastructure, real estate, healthcare, etc., and has thematic, dividend, and balanced sector mandates. Its assets are well distributed amongst equities, fixed income, and research and analytics.

CI is known for its wide selection of investment solutions and leading portfolio management services and works closely with its clients to understand their unique needs and offer customized solutions as per their priorities.

In 2020, CI Financial entered the U.S. wealth management market by acquiring interests in registered investment advisors The Cabana Group, Congress Wealth Management, One Capital Management Management, and Surevest as well as ownership of Balasa Dinverno Foltz.

CI Financial’s Global Asset Management offers traditional, alternative, and ESG strategies to its clients. The firm has completed or announced 12 transactions YTD representing USD16.5 billion.

Most of its subsidiaries are leading businesses. For instance, CI Assante Wealth Management is one of Canada’s largest independent financial advisory firms and CI Direct Investing is a leading Canadian online wealth management and financial planning platform.

CI Private Wealth provides a suite of wealth planning services to high-net-worth individuals, business owners, and families. CI Financial also expanded its ETF business with the acquisition of WisdomTree Asset Management Canada and launched a wide range of income funds sub-advised by DoubleLine Capital. CI Liquid Alternatives exceeded $1 billion in assets under management in just 10 months. 

CI Financial’s Q3 result was marked by flat Canadian retail flows YoY and institutional redemptions of over $1 billion driven by banks and insurance companies. The market decline and the economic impact of the pandemic led to an increase in redemptions at CI. However, CI Financial agreed to acquire four other financial firms during the quarter.

Dividends

CI has an impressive track record of returning money to shareholders through dividends and share repurchases. The company paid $0.18 in dividends payable in April 2021 and repurchased shares worth $78 million during the quarter. It sports an annual dividend yield of 4.2% and a reasonable payout ratio of 30%.

The company last raised its dividend by more than 50% and has grown its dividends at a rate of nearly 1% CAGR in the last decade.

The company is investing in modernizing asset management services, expanding wealth management, and globalizing its operations for future growth. As consumers’ lives become more and more complex and digital, the role of a financial advisor has become more crucial.

Though CI witnessed client redemptions as a result of the COVID-19 impact, the diversification of its clients’ portfolios helped to mitigate extreme market volatility. CI Financial continues to introduce new products in a variety of structures and is increasing its presence in high growth segments. It is also focusing on ETFs and alternatives in the retail sector to drive future growth.

CI Financial typically earns a majority of its revenues from fees earned on the management of investment funds and other fee-earning investment products, and commissions from ongoing service. These fees are predictable and foreseeable granting visibility to its cash flows. CI Financial is also driving operational efficiencies and savings by focusing on cost discipline.

CI Financial (CIX) historical yield
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Competition

The market for financial advisors is extremely competitive. CI competes with other leading financial service providers, investment managers, and product and service types. Broad and diversified distribution,  product capabilities, leading brands, strong client relationships, and successful subsidiaries are CI’s competitive strengths.

Fiera Capital Corp, IGM Financial, Brookfield Asset Management, ONEX Corporation, etc. are its leading competitors.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:BAM.ABAM.ABrookfield Asset ManagementFinancial ServicesAsset Management0.4760.5596.1259.3359.331.020.01071.070.633740.520.086575Tollbooth - UnregulatedNONOYESNOCanada1
TSE:IGMIGMIGM FinancialFinancial ServicesAsset Management0.3444.0110.6613.0213.023.380.05115.110.665542.250.051114Consumable - DiscretionaryNONONONOCanada1
TSE:ONEXONEXONEX CorporationFinancial ServicesAsset Management0.2886.618.003.063.060.000.00460.460.013440.400.163420Consumable - DiscretionaryNONOYESNOCanada1
TSE:CIXCIXCI FinancialFinancial ServicesAsset Management0.3921.764.539.649.642.610.03313.310.316640.720.033113Consumable - DiscretionaryNONONONOCanada1
TSE:BIPCBIPCBrookfield Infrastructure PartnersFinancial ServicesAsset Management0.2489.263.990.000.000.000.02842.840.418242.040.028413Tollbooth - UnregulatedNONONONOCanada1
TSE:UNCUNCUnited CorporationFinancial ServicesAsset Management0.29110.201.333.163.1634.880.01091.090.034441.200.010904Consumable - DiscretionaryNONONONOCanada1
TSE:SIISIISprottFinancial ServicesAsset Management0.2948.751.2734.5634.561.480.02552.550.789941.000.025502Consumable - DiscretionaryNONONONOCanada1
TSE:FSZFSZFiera Capital CorpFinancial ServicesAsset Management0.3810.450.86133.73133.731.520.08048.047.936540.840.143053Consumable - DiscretionaryNONOYESNOCanada1
TSE:AGF.BAGF.BAGF ManagementFinancial ServicesAsset Management0.397.640.543.453.450.530.04194.190.143640.320.041913Consumable - DiscretionaryNONONONOCanada1

Bottom Line

CI’s focus on modernizing asset management and expanding the wealth management business will position it at the forefront of the industry marked by rapid changes and improvements. Its breadth of capabilities and suite of wealth management products uniquely position it to be a market leader in Canada. Its acquisition of businesses should continue to make meaningful contributions to future results.

There are better asset management stocks out there. Until it turns around, it’s a pass.

CIX vs TSX vs SP500
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CIX PE 2021
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DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.