Blake Goldring watched his father build AGF Management Ltd. from the ground up. Now he's rebuilding the mutual fund company's foundation, and it won't be easy.
AGF was once a leader in mutual funds and investment management, long before Canada's banks entered the fray. But today, the company is struggling to develop new business lines while overcoming tepid investment results and outflows of money from its mutual funds. And as it seeks new investment dollars in an increasingly competitive landscape – more than half of new mutual fund sales go to the Big Six banks – new regulations are looming that will change the nature of the industry.
"It's a business that is very much momentum driven, and there was a period where we had headwinds, without a question," Mr. Goldring, AGF's chief executive, said in an interview at his Toronto office. His desk is flanked by a plush Sumatran tiger – an endangered species that the company uses to symbolize its fierce independence.
It wasn't always so tough. When AGF was co-founded in 1957 by Warren Goldring and partner Allan Manford, the Big Banks weren't allowed to sell mutual funds. The company seized on its independence and spirit of innovation, taking its name from the American Growth Fund, the first U.S. equity fund opened to Canadian investors. The product was so unfamiliar that AGF had trouble finding brokerages to sell it at first.
Favourable markets and shrewd management helped AGF grow to about $300-million in assets by 1969. The senior Mr. Goldring became CEO in 1975 and the company continued to add more mutual funds – several the first of their kind in Canada.
Blake Goldring, 56, joined the firm 27 years ago and took over as CEO in 2000, replacing his father as chairman of the board in 2006. In his time at the top he has weathered the end of the tech bubble, the financial crisis and growing market volatility.
AGF has struggled to outperform competitors in recent years, resulting in significant outflows of money from its retail funds. While these redemptions have lessened in the past several months, the firm reported $441-million in net redemptions in the most recent quarter.
After the economic downturn, Mr. Goldring decided investment management must be the sole focus of the firm. The company cut staff, sold its mortgage underwriting business, hired new managers and re-evaluated pricing. It also targeted retail, institutional and high-net-worth clients and found partners in investment areas where it had less experience.
To turn fund performance around, AGF recently hired Kevin McCreadie as chief investment officer to oversee the firm's $37-billion assets under management. Mr. McCreadie has a 30-year track record in the investment business, most recently managing $58-billion (U.S.) at Pittsburgh-based PNC Financial Services Group.
He has moved quickly at AGF, setting a three-year goal to have 60 per cent of the firm's funds generate returns above the industry's median. To get there, he plans to use the team AGF already has, but introduce new risk-management processes to generate more consistent investment results. He also sees growth potential in areas such as infrastructure and alternative energy.
Regaining strength with retail investors is no longer the sole focus. The firm is focusing on institutional players such as pension and sovereign wealth funds. This business now makes up nearly half of assets under management. High-net-worth investors with more than $1-million are also a growing client base.
The firm still has a lot of work to do, says John Aiken, an analyst with Barclays Capital.
"When you look at what's going on within the space,Investors in the street are focusing on what the traditional woes were for AGF, which has been fairly high redemptions within their mutual funds and low levels of sales," Mr. Aiken says. "And while they're addressing that, it's definitely still a headwind."
Still, Mr. Aiken said AGF deserves more credit. "The market is willfully ignoring the momentum they've built up on the institutional side," he said.
There are other challenges looming. Some asset managers are reducing the price of their mutual funds, making some of AGF's funds look comparatively more expensive. And the industry is moving toward changes in disclosure that will require investment dealers to be more transparent about fees.
There's also a growing debate over so-called trailer fees, the payments fund companies make to advisers. Canadian regulators are considering banning them. CIBC analyst Paul Holden said AGF could be hardest hit by such a ban, because of its higher fees, lower margins and "struggling product shelf."
Mr. Goldring is undeterred by the naysayers. "People talk about … the challenges out there. My starting point would be, this is a great industry," he said. "We feel like we're in a growth period now."