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AGF Management Limited (AGF.B)

Q2 2012 Earnings Call

June 27, 2012 11:00 am ET

Executives

Robert J. Bogart - Chief Financial Officer, Executive Vice-President and Member of Executive Committee

Blake Charles Goldring - Chairman and Chief Executive Officer

Analysts

Scott Chan - Canaccord Genuity, Research Division

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

Stephen Boland - GMP Securities L.P., Research Division

John Reucassel - BMO Capital Markets Canada

Paul Holden - CIBC World Markets Inc., Research Division

Presentation

Operator

Compare to:
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» AGF Management Limited's CEO Discusses Q1 2012 Results - Earnings Call Transcript
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Ladies and gentlemen, thank you for standing by. Welcome to AGF's Second Quarter 2012 Financial Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded Wednesday, June 27, 2012. Speakers for today are Mr. Blake C. Goldring, Chairman and Chief Executive Officer of AGF Management Limited; and Mr. Robert J. Bogart, Executive Vice President and Chief Financial Officer of AGF Management Limited.

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Today's call and accompanying presentation may include forward-looking statements. Such forward-looking statements are given as of the date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of such statements and actual results could differ materially. For additional information regarding such forward-looking statements, factors and assumptions, AGF directs you to the caution regarding forward-looking statements which is contained on Page 2 of the presentation, AGF's MD&A for the 3 and 6 months ended May 31, 2012, and AGF's most recent annual information form.

I will now turn the call over to Mr. Bogart. Please go ahead, Mr. Bogart.

Robert J. Bogart

Thank you, operator. Good morning, everyone. I'm Bob Bogart, CFO of AGF Management Limited. Thank you, today -- thank you for joining us today on a discussion of our Q2 financial and operating results. Please note that the slides supporting today's call and webcast can be found in the Investor Relations section of agf.com.

Today, Blake Goldring, Chairman and CEO, and I, will discuss our second quarter 2012 results. Also joining us on the call and available to answer questions is Mario Causarano, President and COO of AGF Trust.

Turning to Slide 4, I'll now turn the call over to Blake.

Blake Charles Goldring

Thank you, Bob, and good morning, everyone. It's been a very active quarter for AGF, and we've seen great changes both within AGF Management Limited and in the world markets as a whole. Europe's continuing credit troubles, slowing growth in the BRIC countries, and uncertain economic rise in the U.S. all continued to weigh heavily on global markets.

The market volatility is not anything new. I think most of us would agree that we are experiencing right now something which is more significant than we've seen for sometime. This volatility has continued to have a negative impact on investment managers around the world.

At AGF, as a global equity-focused business, we remain committed in our beliefs of managing for the long term and to strengthen our position to grow our global investment management operations. This has been our focus and has been communicated to our shareholders on our previous calls together.

Within this context, AGF announced the sale of AGF Trust on June the 6. The value recognized through the sale represents a major achievement. AGF has grown a small loan business that was acquired 25 years ago, and grew it into a valuable business that will generate $420 million of cash from its sale.

Finally, I'm pleased that we are seeing improvement in our investment management performance, with over 40% of our retail mutual funds ranked by MorningStar as first or second quartile on a 1-year basis, up from just over 29% a year ago.

Turning to Slide 5, we'll discuss in more detail some of the key takeaways of our retail operations during the quarter. While we have had some very significant positive developments in the quarter, this environment has presented significant challenges to global equity managers, including AGF. Across our entire industry, fund flows are down 31%, settling at $25.7 billion for the trailing 12 months through Q2 '12 versus $34 billion a year ago.

Returns on the Toronto Stock Exchange as well as the Standard & Poor's 500 and the MSCI have been negative per annum over the last 5 years. On a 1-year basis, the TSX is down over 10%. This is following one of the worst RSPCs in this for equity products that I can remember. We remain convinced that there will be a return to equity products. There has to be given that rates of retirement, demographics and the current returns on fixed income style products. When this all occurs, well, nobody really knows.

The market decreases affected AGF as well. The gross sales in our retail segment were down 28% relative to the second quarter of 2011. Additionally, 66% in the drop in our AUM over the quarter was a direct result of market depreciation and volatility.

I wanted to take the opportunity to update you on the Emerging Market Retail Funds post pro forma management team changes. When these changes happened, we explained to investors that team changes are a normal part of our industry. They're not appreciated but they do happen, and this is something that happens across the industry. When these do occur, we explained that this is a point that it would go and -- hire and rebuild the group. And the results that we have incurred as a result only incurred a slight increase in redemptions, no change in our gross sales and continued outperformance of the funds and very little change in overall AUM. In fact, we have been meeting with many incredible candidates to add to the EM team and to make this product offering and successful team even stronger. We remain committed and focused on serving our advisers and clients with a breadth of product options and new products, and in the second quarter, we announced a new partnership with Eaton Vance Management, a highly-regarded asset manager based in Boston. Together, we launched the new Floating Rate Income Fund, which seeks to earn high levels of current income by investing primarily in floating-rate senior loans and other floating rate debt securities companies domiciled in the U.S. This is exactly the kind of product we think is important to offer Canadian investors in this period of interest rate uncertainty.

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