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Diving deep

MANAGER SPOTLIGHT: CHRISTINE HUGHES

Senior vice-president and portfolio manager, AGF Funds Inc.

In 500 million years, we'll be sediment at the bottom of a valley. Or bits of goo filtered from tar sands in whatever passes for Alberta. If you think about the very big picture, that makes sense. Just ask AGF Canadian Balanced Fund manager Christine Hughes, who's beat the competition since 2005 by tracking global economic currents instead of fretting about which wretched pipeline stock she owns. "My macro understanding of the world drives everything," she says. "If you nail the long-term trend, it makes this stuff a lot easier."

The trend can be your friend

The 40-year-old has an economics degree from the University of Toronto, and that has helped her spot gathering storms before her rivals do. She figures it's better to ride a violent current in the market "instead of swimming against it." That habit prompted Hughes to start dumping financial services stocks back in May, 2007, as their balance sheets turned into mouldy yogurt. "You could see the debt build up," says Hughes. As of Aug. 31, there were no banks in her top holdings. She even gleefully bet on further mayhem in the sector in June by buying a few "ultrashort financials" that tend to rise as moneylenders implode.

Don't lose money

Hughes began her career in 1990 at money manager Cassels Blaikie (now part of Scotiabank). Within two years, she was co-managing $50 million in offshore fixed-income investments for private clients. Those well-heeled types got fidgety at any whiff of risk, and the golden rule was implanted in her nervous system: Don't lose money.

From bonds to stocks, and back

In 1993, Hughes migrated to equities and shifted to running mutual funds for Cassels. She then moved to Strategic Value Corp. in 1997, a smallish player headed by the volatility-friendly Mark Bonham. (The firm has merged into oblivion in the fund industry's endless feeding frenzy.) In 1999, she took over the AGF balanced fund, a mix of stocks and bonds. Back in those go-go days, she ran the equity weighting of the fund as high as 75%, but as of Aug. 31, she was down to 49% stocks and a fat 27% in cash.

Risk and how to manage it

That caution has prompted Hughes to move into a sector that's often considered to be inherently volatile: Three of her five biggest recent stock holdings are gold miners. She figures that bullion will rise as governments try to juice exports by letting their currencies slide in value: "We're in for competitive devaluations."

When there's time to relax

In whatever hours Hughes can carve out between caring for her two boys, aged 2 and 3, she likes to play golf. Scuba diving is another passion. "Everyone knows how beautiful nature is above water," she says, "but few people pay attention to what's below, and it's just as beautiful." --

*****

THE BOTTOM LINE

AGF Canadian Balanced Fund

1 Year % 5 Year %
Average annual compound returns (to Aug. 31, 2008)2.1 8.9
Average Canadian balanced fund -1.1 7.3

© 2007 The Globe and Mail. All rights reserved.

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