Embracing Change

Embracing Change

Embracing Change The opening sentence of AGF Management’s 2016 annual report is a pretty good summary of where the firm sees its future: “At AGF, we believe a tiger can change its stripes.” Part of its company logo, the tiger is synonymous with AGF, and this is an institution that is clearly in the midst of great change.

Overseeing the transition is CEO and chairman Blake Goldring, the son of company founder C. Warren Goldring. The elder Goldring was a pioneer of Canada’s mutual fund industry – as a 2009 Globe and Mail article put it: “What Henry Ford did for cars, Warren Goldring brought to the world of Canadian money management. His simple concept was to make Bay Street’s high-end portfolio management skills available to Main Street’s investors.”

That approach brought the company great success, which lasted for decades until the 2008 financial crisis and its aftermath devastated AGF’s business. Assets under management, which peaked in 2007 at $56 billion, went into free-fall, necessitating a strategic retreat in 2012. Since then, the firm has made a series of moves to reposition itself as a diversified global asset manager with a new focus on high-net-worth clients, as well as the institutional and alternative spaces.

According to the captain of this mammoth ship, AGF’s rebuilding strategy is now starting to bear fruit.

“This organization started as a mutual fund company; my vision for the firm has always been that we should be more than that – we should truly be a global asset management firm,” Goldring says. “That means you have to be in other asset classes than just mutual funds.”

A major part of AGF’s evolution as a global investment manager has been its willingness to take a chance on different businesses. Even before the financial crisis, the company was beginning to branch out in a number of different ways.

“In the early 2000s, we created AGF Trust, which we ultimately sold for $420 million to B2B Bank,” Goldring says. “That was a move into a different sector that allowed us into mortgages and various RSP loans. It was a good money-maker for us, and by selling, we decided we wanted to reinvest into different areas, one being infrastructure.”

AGF celebrates its 60th anniversary this year, and while the company is very proud of its legacy, what it will do in the future is a greater focus for Goldring now. As he explains, despite some lean years, mutual funds are still the company’s bread and butter, but there will undoubtedly be much more on AGF’s plate heading forward.

“Investment management is still the engine of this whole organization,” he says. “We spent quite a bit of time searching out our new CIO and president, bringing in Kevin McCreadie. He brings great acumen in invest­ments, focusing on low volatility, a discipline he brought from PNC Financial Services.”

Turning tide
A graduate of the University of Toronto, Goldring also has an MBA from INSEAD in France. He began his career in financial services in 1983 with BMO, working in international, corporate and government banking before moving onto the family business in 1987. He was named CEO of AGF in 2000 and chairman in 2006, but the decade since has been a trying time. As has been the case with many mutual fund providers, mass redemptions have been commonplace at AGF since 2008, although that tide finally appears to have turned.

In the fourth quarter of 2016, AGF reported a 26% increase in mutual fund flows, which is welcome news for the company’s top brass. The financial crisis left its scars, however, so diversifying the firm is paramount for Goldring.

“In our strategic retreat of 2012, we decided we needed to get into the world of alternatives,” he says. “The idea of having hedge funds wasn’t that exciting to us, so we wanted to do something different. We looked for partners in the alternative space and came across Greg Smith, who had just finished a sterling career with Macquarie, Brookfield and RBC.”

Smith ultimately joined AGF in 2014 and has since set about building its infrastructure platform. Central to that is the InstarAGF Essential Infrastructure Fund, which is expected to reach its target of $750 million and close in the second quarter of 2017. The crown jewel of the fund is its interest in Toronto’s Billy Bishop Airport, acquired in 2015 as part of the Nieuport Aviation Infrastructure Partners consortium.

Looking at the company today, it’s clear that AGF is fully committed to its transition. Of its $34 billion in assets, $23.9 billion is in the mutual fund space, while alternatives account for $685 million, its burgeoning private client business has amassed $4.9 billion, and its new venture, the quantitative solu­tions ETF platform AGFiQ, has $4.7 billion.

After a long descent, it appears AGF is finally heading on an upward trajectory again.

“These are interesting times,” Goldring says. “I think for a firm like AGF, given our size and the capital we can invest in different markets, but also small enough that we are fleet of foot, this is the perfect environment.”

Staying active
One of the major criticisms of the mutual fund industry in Canada and firms like AGF is that performance has lagged while fees remain high by global standards. With ETFs now offering a different option for investors, the industry has responded, and fees have come down across the board. AGF is no different – it lowered fees by 10 to 60 basis points on 23 of its largest funds in 2016.

While there has been a lot of change at the company in recent times, one thing that won’t change is its commitment to active management, both in mutual funds and its newly launched ETF suite. As Goldring says, we live in interesting times – but they’re also very unpredictable, possibly tumultuous times. It’s a well-worn axiom that the markets hate uncertainty, and while that hasn’t proven to be the case so far in 2017, no one knows what lies ahead.

“We have a change in policy in the United States, and every day seems like we are seeing something new,” Goldring says. “The best algorithm in the world won’t be able to anticipate that. Not only do you need to look at historical correlations, but marry that with real-time analysis by professionals.”