IGM Financial Spends $468 Million to Expand into China

IGM Financial Inc. (TSX:IGM) has frequently been in the cross-hairs of bearish investors who believe the company’s best days are behind it.

IGM is the parent company of Investors Group, the investment advisory company that primarily pushes expensive mutual funds to individual investors. It also owns Mackenzie Financial, one of the largest fund managers in Canada.

As more and more investors move towards lower-cost options like ETFs, they move away from both Mackenzie’s mutual funds and Investors Group consultants. That can’t be good to IGM’s bottom line.

Management is well aware of this criticism and took a big step towards silencing naysayers by announcing it would spend $468 million to buy a 10% stake of China Asset Management.

The deal will likely close sometime in the first half of 2017 after it has been reviewed by China’s regulatory body.

China AMC is a huge investment manager in Asia, with more than $215 billion in assets under management. IGM only has $140 billion in assets under management.

IGM isn’t the first Canadian company to take an ownership stake in China AMC. Power Financial -- which is IGM’s largest shareholder -- bought a 10% stake in the asset manager back in 2011.

IGM’s CEO said "this acquisition gives IGM Financial the opportunity to participate in a rapidly-growing asset management industry in the world’s second-largest economy."

Investors collectively yawned at this news, sending IGM shares up just 0.5% on the Toronto Stock Exchange to $38.14 each. Shares are relatively close to their 52-week high of $40.00. IGM also pays a 5.9% dividend.