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Blake Goldring, CEO of AGF Management (Yvonne Berg For The Globe and Mail)
Blake Goldring, CEO of AGF Management (Yvonne Berg For The Globe and Mail)

Redemptions hit AGF bottom line Add to ...

AGF Management Ltd. swung to a third-quarter loss from a profit a year ago as assets of the mutual fund company took a sharp tumble amid rising redemptions.

The company reported Wednesday that net outflows in its mutual funds rose to $709-million in the quarter from $585-million a year ago. But net redemptions, including mandates catering to institutional investors, totalled $2.4-billion.

Some of money leaving the firm came from portfolios run by AGF’s former star emerging markets manager Patrica Perez-Coutts, who jumped ship in late spring to join the Canadian unit of U.S-based Westwood Holdings Inc.

But a big surprise stemmed from the fact that the bulk of the $1.7-billion withdrawn on the institutional side came from quantitative strategies run by AGF’s subsidiary Highstreet Asset Management and a growth mandates managed by AGF.

AGF’s chief executive officer Blake Goldring told analysts in a conference call that the firm is now expecting another $1.5-billion in net redemptions from institutional investors in the fourth quarter from the same Highstreet and growth mandates.

But he acknowledged that further net redemptions from Ms. Perez-Coutts’s portfolios could come next year because institutional investors typically take six to 12 months to review a manager change before pulling the plug.

“It’s worse than we expected,” Canaccord Genuity analyst Scott Chan said in an interview. “The redemption pipeline was a bit of a surprise ... It represents another $1.5-billion in assets that are going to be gone, and that is not even including expectations that there is going to be more emerging mandates lost, too.”

Even though AGF has hired four new members for the firm’s emerging markets team under Stephen Way, there could be more outflows on the mutual fund side because Ms. Perez-Coutts only began running her rival Westwood Emerging Markets fund for National Bank Securities at the end August, Mr. Chan said.

During the quarter, AGF also closed a deal to sell its trust unit to Laurentian Bank for $421.6-million in order to focus on its investment fund business. Total assets under management fell 14.8 per cent to $41.2-billion at the end of August from a year ago.

Toronto-based AGF reported a loss of $13.3-million, or 14 cents a share, compared with a profit of $15.4-million, or 16 cents a share, a year ago. Losses from continuing operations totalled $19.3-million, or 20 cents a share, against a profit of $8.5-million, or 9 cents a share.

Mr. Chan said AGF’s adjusted profit from continuing operations, which excludes restructuring and other charges, came in lower than expected at 11 cents a share. “I was expecting 17 cents a share, while consensus was about 19 cents a share,” he added.

AGF booked a restructuring charge of $3.8-million related to the sale of its trust subsidiary. Revenue from continuing operations fell 20.9 per cent to $119.8-million from a year ago, reflecting lower assets under management.

Mr. Goldring said that AGF is actively retooling its business, and has $400-million from the sale of AGF Trust to help “weather market volatility,” pay for acquisitions and to “reward shareholders” by buying back shares or paying dividends.

The firm is now targeting the reduction of selling, general and administrative expenses by $10-million, and is working with “new leadership” at Highstreet, which was acquired in 2006, to improve performance, he said.

“The equity-market headwinds continue to create challenges for our industry, and of course AGF,” said Mr. Goldring, referring to the fact the firm still has the lion’s share of its assets in stock funds.

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