AGF Management Ltd. blamed slower mutual funds sales during the registered retirement savings plan (RRSP) season for an 11-per-cent drop in first-quarter profit.
Net redemptions from its mutual funds also grew to $680-million in the quarter ended Feb. 29 from $402-million a year ago, the Toronto-based wealth management company said Wednesday.
Investors were flocking to balanced and bond offerings during the RRSP-selling season, and were generally redeeming stock funds, AGF’s chief executive officer Blake Goldring told analysts during a conference call.
“As an equity-focused manager, this industry trend was a factor in [AGF’s] gross sales being down from last year.”
Asked what would AGF do if investors continued their risk-averse behaviour, Mr. Goldring said that his firm has some “innovative” product offerings and a new partner to help the firm increase assets. Those plans will be announced in the second quarter.
AGF’s institutional business, however, is doing well with $900-million of net sales expected in fiscal 2012 from existing and new global clients, he predicted.
First-quarter profit fell to $26.1-million, or 27 cents per fully diluted share, from $29.2-million, or 32 cents a share, a year ago.
Total assets under management slid 8.8 per cent to $47.8-billion in the quarter. Consolidated revenue dropped to $155.5-million because of a 4.8-per-cent decrease in investment management revenue.
During the quarter, AGF’s trust unit, which is involved in the mortgage and RRSP-loan business, paid a $20-million dividend to AGF Management.
“We will be looking to release more capital from AGF Trust through 2012 as it is overcapitalized from a regulatory and risk perspective,” he said, adding there will be “enough capital to fund the strong growth of loan originations.”
Barclays Capital analyst John Aiken said that the first quarter’s earnings “do little to assuage our concern that it will continue to underperform its peers on the back of lower new mutual funds sales.
“While we remain cautious on our outlook for equity valuations of the near term, a more positive outlook could merit a look at AGF, particularly for value investors,” Mr. Aiken wrote in a note to clients. He has a underweight-neutral rating on AGF with a one-year target $15 a share.