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Morningstar | IGM Financial's positioning leaves it more exposed to negative trends affecting the Canadian market.

Even though IGM Financial has historically generated solid operating margins and maintains a leading share in the Canadian mutual fund market, we've been less than impressed by its ability to generate organic growth since the 2008-09 global financial crisis. Investors Group and Mackenzie Financial have consistently struggled to generate positive flows, with the latter seeing negative annual organic growth on average since 2007. To us, this is a sign of a weaker competitive position than the firm has had historically.While Mackenzie has fared a bit better than Investors Group on the fund performance front, both have been average to below-average performers for some time. Investors Group, with its impressive advisor network of 4,000-plus consultants, has done a much better job of holding on to assets than Mackenzie, though, illustrated by superior redemption rates, despite a far worse performance record. This illustrates the strength of Investors Group's distribution network, a key asset for IGM Financial.Even so, improving investment performance remains a work in progress. At the end of 2017, 32% of Mackenzie's funds had a Morningstar Rating of 4 or 5 stars (compared with Morningstar's coverage of comparable funds at 33%), which while down from 41% during 2016 (compared with comparable funds at 40%) was still a big improvement over 2015 (when just 20% held that distinction). Investors Group's funds, meanwhile, continue to struggle, with just 15% carrying 4- or 5-star ratings at the end of last year (compared with our coverage of comparable funds at 26%).The firm has attempted to boost flows via other means, including taking price cuts at Mackenzie and Investors Group, getting rid of underperforming managers, consolidating product lines, and discontinuing deferred sales commissions. These efforts have had mixed results. Investors Group remains one of the higher-priced product lineups, higher than both CI Investments and AGF Management (two of the higher-priced purer-play asset managers), and much higher than the Canadian banks. Poor performance, higher fees, and a reliance on a closed advisor network leave the firm negatively exposed to industry trends.