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Star fund manager leaves AGF to join U.S. firm

AGF Management Ltd.'s emerging markets star manager Patricia Perez-Coutts has joined a U.S. money manager that plans to open an office in Canada.

Dallas-based Westwood Holdings Inc. said Wednesday it is expanding its global and emerging markets strategies under Ms. Perez-Coutts and four other members of her AGF global equity team.

Westwood plans to open a new office in Toronto, and the new affiliate will be called Westwood International Advisers Inc.

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The addition of the AGF managers and analysts "will present new growth opportunities," Westwood president and chief executive officer Brian Casey said in a statement.

On Monday, Toronto-based AGF announced that Ms. Perez-Coutts, who runs the award-winning AGF Emerging Markets Fund, would be leaving the firm on May 2. Stephen Way, who heads the AGF global equity team, will take over her fund that has about $2-billion in mutual fund assets.

Industry sources say that Ms. Perez-Coutts has been long been wooed by rivals, but likely jumped ship because she was able to bring other members of her team with her. She will run emerging market strategies for institutional investors, but it is still possible she could also be hired as an external manager by any Canadian fund company and provide competition for AGF, a source said.

AGF, which has been suffering from net redemptions in its mutual funds for several years, will not disclose how much Ms. Perez-Coutts runs in institutional money. However, GMP Securities analyst Stephen Boland suggests that the amount is around $3-billion.

"Although we believe Stephen Way and the [two]newly promoted managers are solid replacements for Patricia Perez-Coutts, we do view the development negatively," Mr. Boland said in a report. The $5-billion in assets run by the manager represents 11 per cent of total assets of AGF, he noted.

"For the institutional business, while clients are free to move their mandates in the short-term, we believe most will watch the performance over the next year before taking action," wrote the analyst who slashed his one-year target on AGF to $15.50 a share from $17.00.

Ms. Perez-Coutts, who has run AGF Emerging Markets since 2002, has the best 10-year track record for an emerging market fund sold in Canada with an average annual gain of 11.1 per cent. It has beaten the MSCI Emerging Markets Index annualized return of 9.2 per cent in Canadian dollar terms.

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Earlier this week, other analysts expressed concern about the implications of the departure for AGF. Her fund was a "category killer," said CIBC World Markets analyst Paul Holden. "We believe there is the risk of significant net outflows…The emerging markets mandate has been also been one of the key sources of new institutional money."

The four other AGF global equity team members who also jumped ship include portfolio manager Thomas Pinto-Basto, associate portfolio manager Alice Popescu, and analysts Richard Dolhun and Martin Pradier.

Christine Hughes, another female award-winning fund manager who left AGF in early 2010, has also just resurfaced. On Wednesday, NEI Investments said that it has signed an agreement with Ms. Hughes' new firm, OtterWood Capital Management Inc., to take over the $330-million Ethical Balanced Fund starting May 14. She will also manage two new NEI funds beginning in July.

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