AGF replaces Canadian value manager

By Mark Noble | November 23, 2007 | Last updated on November 23, 2007
3 min read

AGF Funds has announced the appointment of AGF International Advisors Company Limited (AGFIA) as the portfolio advisor of its Canadian value funds.

The Dublin-based AGFIA, led by popular value manager John Arnold, will take over as portfolio advisor for the AGF Canadian Value Fund and the AGF Canadian Balanced Value Fund (previously called the AGF Canadian Real Value Fund and the AGF Canadian Real Value Balanced Fund).

The two funds had been managed by Keith Graham, who joined AGF in 2003 after a successful tenure as a manager at AIM Trimark. Graham, who was known for a methodical and conservative investment approach, has left AGF.

According to AGF’s president, Randy Ambrosie, it was Graham’s decision to re-evaluate his career that prompted the company to look into a management change for the funds. Ambrosie says Graham and AGF parted “on very good terms.”

“While he was incredibly focused on managing his portfolios, Keith confessed that he was thinking about other things he wanted to do with his career,” Ambrosie says. “At that point, the conversation was very positive. We respected Keith for being open and honest with us, but it forced us to take a step back and really review our options.”

Ambrosie says the winning option was pretty clear; AGF wanted to see if John Arnold and the AGFIA team could translate their successful value-driven approach to the Canadian market.

AGFIA manages some of the most popular international equity funds available in Canada, including the AGF International Value Class and the AGF European Equity Class.

Mark Chow, a senior analyst with Morningstar Canada, says AGFIA’s style may not translate precisely into the Canadian market. Arnold’s team has an excellent track record in European and international markets, he says, but the Canadian market is a slightly different beast.

“The Canadian market isn’t as wide as some of those other markets they’ve been investing in, but if you look at their funds, AGFIA has been kind of heavy in financials anyways, which lends itself to the Canadian market. It will be interesting to see what happens.”

Chow does have some concern about the team’s experience in the Canadian market, as well as whether it might be stretching its resources thin to follow such a wide array of markets.

Ambrosie feels confident in AGFIA’s ability to find value in Canadian equities, noting that early in his career, John Arnold managed a Canadian equity portfolio. AGFIA will be supported by a group of research analysts in Toronto.

“When you look at the track record of AGFIA, it has really been all about that [value-driven] process. They’ve applied it all over the world. The consistent outcome of that process has been absolutely magnificent,” Ambrosie says.

Ambrosie expects the sales of AGF Canadian Value Fund and the AGF Canadian Balanced Value Fund to benefit from AGFIA’s popularity.

“John, Rory Flynn, Richard McGrath and this whole team of professionals in Dublin have been so popular with our advisor clients. Combine that with the relationship they have with Martin Hubbes [AGF’s chief investment officer] and the rest of our investment team, [and] we think this is a great opportunity for an improvement in the sales trend line.”

That’s not to say sales were bad under Graham. True to his investment style, Graham eked out moderate conservative returns over his tenure and seemed to achieve moderate sales success.

“If you look at the one-year return of AGF Real Value Fund, it gained 7.3%, and its change in assets was 18%, so this was a fund whose asset growth exceeded its performance growth,” says Rudy Luukko, investment funds editor at Morningstar Canada.

Luukko says Graham’s other fund didn’t fare as well, with a 4% decline in assets despite positive performance growth — still, not dreadful considering current market conditions.

Graham’s departure has led to rumours in the industry that he may pop up somewhere else. Industry observers have been speculating on his departure ever since his former AIM Trimark colleague, Geoff MacDonald, departed from Trimark earlier this year. Some believe Graham and MacDonald, who co-managed the Trimark Income Growth Fund, may set up their own shop in the future.

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Mark Noble