AGF Management Ltd. , which saw net redemptions rise 11 per cent to $585-million in the third quarter, is taking more steps to stem outflows, says chief executive officer Blake Goldring.
“Retail redemptions are not where we want them to be,” Mr. Goldring told analysts during a conference call on Wednesday after AGF reported a 7.6-per-cent increase in third-quarter profit.
The crisis of confidence in Europe and the United States, along with a strong Canadian dollar, have all been “headwinds on the retail side of our business,” which has a heavy equity focus, he said. “But we are confident that we are on track on our strategy, and will get out of the doldrums on the redemption side.”
Changes are now taking place at AGF’s unit in Dublin, which oversees funds like AGF European Equity Class, AGF International Stock Class and AGF Global Value. These funds, a source for some of the net redemptions, have underperformed because they have been overweight in European financial stocks that have been beaten up amid concerns over the euro-zone debt crisis. The European fund, which has about 50 per cent invested in financials, lost 18.4 per cent this year to Wednesday and 20 per cent last year.
John Arnold, lead manager of these funds, is retiring next month, and is being succeeded by his protégé Rory Flynn, who will now have to report to the Toronto office, Mr. Goldring said. “We have tightened the constraints at the sector level as well as the stock level.”
With the market volatility, any new fund sales have gravitated towards fixed income and, to a lesser extent, balanced funds, he said. The acquisition of Acuity Ltd. this year was prompted partly by the fact the fund company has “strong product offerings in those sectors,” he said.
The Toronto-based wealth management company, which has had had net outflows in its mutual funds since late 2007, saw total assets rise to $48.4-billion for the quarter ended Aug. 31 from $42.9-million a year ago. That was due to assets from the acquisition of Acuity. On the institutional side, where margins are lower, AGF attracted net inflows of $980-million during the quarter.
Barclays Capital analyst John Aiken, who reduced his one-year target on AGF to $17 a share from $18, said he continues to believe that overall asset and earnings growth “will remain challenged” as the ongoing market uncertainty and volatility will weigh on investment performance and sales.
AGF, which has a trust arm, reported a profit of $29.9-million, or 31 cents a share, for the latest period. That compares with a $27.8-million profit, also 31 cents a share, a year ago. Consolidated revenue for the quarter rose 17.4 per cent to $174.5-million.
AGF Trust offers GICs, loans and mortgages through the financial adviser and mortgage brokerage channel. Its provisions for loan losses – cash set aside to cover loan defaults – fell 38.3 per cent, while loan originations rose 154.3 per cent to $112.4-million in the quarter.
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