Two award-winning mutual fund managers have left AGF Funds Inc. and gone over to competitor Sprott Asset Management Inc.
Charles Oliver and Jamie Horvat, who managed or helped manage five top-performing funds with assets totalling nearly $2.3-billion at Dec. 31, unexpectedly resigned Friday, AGF Funds said Monday.
“We've hired Charles and Jamie,” Sprott chief executive officer Eric Sprott said Monday. “They'll be working with [chief investment strategist John Embry] and me. John's not leaving, but he is 67.
“We've always known we needed to provide some linkage for the future there. These guys are young and have excellent performances last year, and they are quite diversified in what they can do. They ran a lot of different investment styles at AGF, so they'll be very helpful to us and will complement the team. We have a pretty good group of guys here now.”
Mr. Sprott added: “They will certainly be involved in precious metals. We may end up opening other funds they might run as well. For their own interests, they don't want to just do precious metals, so we'll probably open up something else.”
However, he would not be specific. “No firm decision has been made there.”
Neither Mr. Oliver nor Mr. Horvat could be reached for comment immediately, and AGF Funds officials declined to say why the two managers had left.
“I've heard the reason they were leaving [AGF] was to do with compensation, some issues with year-end bonuses,” one industry source said.
Martin Hubbes, AGF Funds' chief investment officer and executive vice-president, said there was no bad blood behind the departure. “I want to stress that they left on amicable terms,” he said in a telephone interview.
He and the firm's president, Randy Ambrosie, said they had had no advance notice that Mr. Oliver and Mr. Horvat were planning to leave.
“But these things happen from time to time,” Mr. Hubbes said.
AGF disclosed the two managers' departures in one sentence in a news release that was otherwise devoted to an announcement that the firm's vice-chairman — and former chief investment officer — Robert Farquharson is assuming “full portfolio management responsibilities” for a number of funds with which Mr. Oliver and Mr. Horvat have been associated: the AGF Canadian Growth Equity Fund, (which had $1.14-billion in assets at Dec. 31), AGF Canadian Resources Fund ($460-million), AGF Global Resources Class ($120.3-million) and AGF Precious Metals Fund ($674.3-million).
Mr. Farquharson, 67, who has been with AGF since 1963, also will assume management of AGF Canadian Small Cap Fund ($355.2-million) and AGF's portion of the Harmony America's Small Cap Equity Pool, the release said.
AGF also said it is shifting associate portfolio manager Coulter Wright, who has been specializing in energy stocks, over to help manage the AGF Canadian Growth Equity Fund.
“He is somebody we've been very excited about,” Mr. Ambrosie said in a telephone interview.
As well, Mr. Hubbes has launched a search to recruit at least one new investment manager specializing in Canadian and global resources.
He and Mr. Ambrosie insisted that, despite Mr. Farquharson's age, they expect him to stay with the firm for a considerable time.
Apparently anxious to calm fund customers who may be concerned about the departures, they emphasized that Mr. Farquharson not only has served as a mentor to younger portfolio managers at the firm but has been involved since inception on several of the funds the departing managers headed.
Through a spokeswoman, Mr. Farquharson noted that he is a significant shareholder in the company and plans to “continue to play an important role in AGF's fund management.”
Like the other two AGF executives, he expressed confidence in the “bench strength” of the team of portfolio managers he has helped build.
Funds managed by Mr. Oliver, Mr. Farquharson and Mr. Horvat have won several performance awards in recent years at the annual Canadian Investment Awards.
“They've got a fantastic track record,” said one financial services analyst.
According to information on AGF's web site, Mr. Oliver joined the firm in 1997, became an equity analyst in 1999 and was first elevated to fund manager in 2002 when he was appointed co-manager of AGF's global and Canadian resources funds. He began his career in 1987 as a trader at stock brokerage Midland Walwyn, later moving to its retail side as an adviser.
Mr. Horvat, meanwhile, signed on in 2004 as an equity analyst – having worked for five years at another large mutual fund firm – focusing on resources and Canadian small-cap companies, and was first bumped up to portfolio management in 2004.
AGF's web site shows the Canadian Growth Equity fund returned 17.4 per cent over the five years to Dec. 31, the Canadian resources and global resources class 26.7 per cent and 27.7 per cent, respectively, while the precious metals fund has delivered 25.9 per cent. In its three years of operating, the Canadian small cap fund has delivered a 22.8 per cent return, the web site shows.
Only one other of AGF's 50-plus funds, the AGF China Focus Class, performed better over that period, delivering a 28.6 per cent return.
Still, investors appear to be concerned. AGF's class B shares were down $1.17 or 4.5 per cent to $24.83 in mid-afternoon trading on the Toronto Stock Exchange. That was more than three times the declines experienced Monday by several other fund managers, including Investors Group and CI Financial Income Fund.
Analyst Gabriel Dechaine at Genuity Capital Markets in Toronto said in a note to clients that the departure of Mr. Oliver and Mr. Horvat is “not good news” for AGF.
“Although Mr. Farquharson has been co-manager for most of the funds, changes at the fund-manager level are not generally perceived as positive,” he said. “Advisers often use fund management changes as a reason to move clients into new funds. Despite the continuity at AGF (i.e., with Mr. Farquharson), the company faces higher fund redemption risk, in our view.”
Mr. Dechaine, who has a “hold” recommendation on AGF's shares, concluded that the departures “will put additional short-term pressure on AGF's shares.”
Coupled with unstable equity markets and several other factors, he said, “AGF's sales outlook heading into this year's RRSP season is downbeat, in our view.”
