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AGF manager plans steady-as-she-goes course

Says 'fine tuning' is what's needed to turn around fund's fortunes, KEITH DAMSELL writes

A precise scalpel -- rather than a heavy axe -- is likely the tool of choice for Martin Hubbes, newly appointed chief investment officer at troubled AGF Management Ltd. Dramatic change within AGF's fund group is unlikely under the reign of Mr. Hubbes, a well-regarded portfolio manager at the company for the past 13 years. He was appointed chief investment officer and senior vice-president on June 29, succeeding Bob Farquharson who remains vice-chairman.

"We are going to very much continue fine tuning," Mr. Hubbes said. His chief role is providing the company's fund management team with the right tools to succeed and monitoring their performance.

"We have a fantastic team here and there is always a way to do it better," he said.

Mending redemption woes is top of the list. Retail investment dollars have been heading out the door for the past 40 months. Mutual fund assets under management slipped to $21.6-billion last month, down from a peak of $29.9-billion in 2001.

Much of the heavy lifting to fix AGF has been undertaken over the past year by former football star Randy Ambrosie, executive vice-president of sales and marketing. The company has bulked up its sales team, hired new fund managers, tweaked fees and launched a handful of new products. Nevertheless, redemptions continue. The company claims next winter's sales season will be the best measure of how well its sales strategy succeeds.

Redemptions are "the nature of the beast when you run a multi-style [investing] environment," Mr. Hubbes said. "There's always a style that's in favour and a style that's not in favour. When you focus on the long term, you have to sometimes look past some short-term issues."

Case in point is the $3.6-billion AGF International Value Fund, the firm's largest retail fund. Harris Associates LP of Chicago took over management three years ago; under its mandate, the fund has returned an uninspiring average of 0.35-per-cent annually.

Harris "are doing an excellent job," Mr. Hubbes said. "A portfolio manager's job is not performance at any cost. It's performance by minimizing risk . . . The two things are a tradeoff, so Harris is making that tradeoff very carefully.

CI keeps mum on Amvescap

It's all quiet on the takeover front at CI Fund Management Inc. The market is still waiting for the next shoe to drop in the Toronto fund company's plans to buy troubled British fund company Amvescap PLC. Bill Holland, CI's outspoken president and chief executive officer, confirmed earlier this month that Canada's third-largest fund company made an unsolicited $7-billion cash offer for Amvescap and its coveted Canadian operations, AIM Funds Management Inc. The investment community was anxious for news when CI delivered its fourth-quarter results last week. What it got was a less than inspiring "we don't have any plans to do anything right now" update from Mr. Holland on CI's conference call.

The absence of a formal offer has caused Amvescap's shares to lose ground. The London Stock Exchange-listed shares have drifted to the £4 ($8.45) range, well off the July 11 high of £4.32 following news of CI's intentions.

Don't hold your breath for any speedy M&A activity. On July 15, Amvescap surprised the investment community when it ended its long search for a new leader, poaching Franklin Resources Inc.'s co-CEO Martin Flanagan for the executive office. He has his work cut out for him -- restructuring is inevitable, especially at Amvescap's poorly performing U.S. operations. Observers suggest it's unlikely the new CEO will pick up the phone for a summer chat with Mr. Holland.

CI seems content to bide its time and let the hedge funds -- Amvescap's newest and noisiest shareholders -- apply the pressure. It may be several weeks before we see a formal CI offer or another potential bidder surface. Time is on CI's side, and its infatuation with AIM Funds and the Trimark brand is long and storied.

MFDA hits rogue salesman hard

Mutual fund salesman Earl Crackower has been banned from the securities business for life and fined $3.5-million for taking clients' money and misleading the industry's regulatory body.

The Mutual Fund Dealers Association found Mr. Crackower, who worked at Worldsource Financial Management Inc. of Markham, Ont., until 2003, failed to deal fairly, honestly and in good faith with clients and engaged in business detrimental to the public interest.

Mr. Crackower was found guilty of all four counts against him, including soliciting and accepting $3.5-million from 43 clients and failing to return or account for the money of 35 of those clients.

The July 20 decision from the MFDA is the single largest fine against an individual in the regulator's three-year history of enforcement.

Sentry trusts in commodities

Sentry Select Capital Corp. is the latest company to cash in on the commodities boom.

On July 19, the Toronto wealth asset manager's Sentry Select Commodities Income Trust was closed, an offering that raised a cool $170-million. The trust will sink 75 per cent of the cash into a portfolio of commodity-related income funds and the remainder will track the Rogers International Commodity Index, a seven-year-old index launched by U.S. investment guru Jim Rogers.

The Sentry trust follows the May 31 closing of the Criterion Dow Jones-AIG Commodity Index Fund. The index fund raised $30-million and, unlike the Sentry offering, is a pure commodities play, tracking the U.S. index through passive exposure to commodity futures. It's one of the first products from Criterion Investments, the new structured products division at Toronto's VenGrowth Asset Management Inc.

The commodity market has been buzzing this year thanks to China's insatiable demand for raw materials. Unfortunately for Canadians, there are few commodity-driven investment products available in this country. The sole mutual fund is the AGF Managed Futures Fund, a diversified portfolio of commodity contracts with a volatile history of returns.

© 2007 The Globe and Mail. All rights reserved.

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