Why AGF Global Equity Class

By: Portfolio Serivces Group • February 7, 2017 • Product Insight

In many regards, 2016 was an unprecedented year. It began with a sell-off in global markets in January on the back of disappointing economic data and depreciation of the Chinese renminbi. Then there was the Brexit vote in June, the widely unexpected victory of Donald Trump in the U.S. presidential elections in November, and finally, the Italian Referendum vote in December.

As we enter into 2017, uncertainty remains, given a number of key elections slated in Europe, and concerns over a hard Brexit, not to mention uncertainty over the economic policies the Trump administration will prioritize.

We believe an environment such as this requires a proven manager and a proven process.

AGF Global Equity Class, managed by Stephen Way, has a 20-year track record and has successfully navigated various market conditions. Here are three key reasons to own AGF Global Equity Class:

  1. Consistent performance;
  2. A proprietary country allocation framework;
  3. Strong risk-adjusted returns.

1. Track Record of Consistent Performance

 AGF Global Equity Class has outperformed peers by a margin of 23% over the last 15 years.

Importantly, this performance has been consistent. Over the last 10 years, on a rolling 5-year basis, the Fund has outperformed 100% of the time1 and, in some cases, this outperformance has been by over 200-basis points (annualized) on a rolling 5-year basis.

2. Country Allocation Framework – Helps Us Pick the Right Markets

The right stock in the wrong country can prove unfavourable to investors. For this reason, we use a country allocation framework to identify attractive markets.

The key factors we examine include:

  • Valuation (e.g., price to book, price to earnings)
  • Risk (e.g., current account to GDP and beta)
  • Momentum (e.g., price momentum and earnings revisions)

Looking back over the last 10 years, country allocation has contributed 24% to our excess returns and the remaining 76% of excess returns has come from security selection2.

 

Figure 5 – AGF Global Equity Class – Emerging market exposure (Dec. 2002-Dec. 2016)

An example of how the country allocation framework helps us pick the right countries – indicators in our framework led us to lower our exposure to emerging markets in early 2005, and we continued to trim our exposure until 2008. Emerging markets faced a significant correction starting in May 2008 and our lowered exposure to the asset class aided performance.

3. Strong Risk-Adjusted Returns Driven by Our Focus on EVA and Risk Controls

To identify attractive stocks, we look for companies that can generate positive Economic Value-Added (EVA). In other words, we look for companies that can earn a cash return on investments that is in excess of its cost of capital. This approach leads us to quality companies that can consolidate market share and invest opportunistically in down markets. We also incorporate risk management throughout the investment process starting at the country level, then in the security selection process, and by ensuring we are well diversified across and within sectors, as well as across and within countries.

 

Figure 6 – Strong risk-adjusted returns

Our focus on EVA, combined with risk controls throughout the investment process, has helped us deliver strong risk-adjusted returns for investors.

Conclusion

"Skill in the investment business is built on the foundation of process, and process allows you to take advantage that others can’t see or exploit."

Michael Mauboussin
(head of global financial strategies at Credit Suisse)

While past performance doesn’t guarantee future returns, as the Fund’s performance has been built on a disciplined and repeatable process employed over the last two decades, we believe our strategy will continue to add value to investor portfolios in the future.

 

For more information on AGF Global Equity Class, including up-to-date performance information, please visit AGF.com/GlobalEquity or contact your Financial Advisor.

1. Calculated by taking the number of periods the Fund has generated a return that is greater than the peer average divided by the total number of periods in question

2. AGF Risk & Portfolio Analytics, December 31, 2016

Effective April 1, 2016, AGF reduced the MF Series management fee from 2.50% to 2.00%. AGF International Stock Class and AGF Global Value Class merged into AGF Global Equity Class on May 20, 2016.

The commentaries contained herein are provided as a general source of information based on information available as of December 31, 2016 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated. The information contained in this commentary is designed to provide you with general information related to investment alternatives and strategies and is not intended to be comprehensive investment advice applicable to the circumstances of the individual. We strongly recommend you consult with a financial advisor prior to making any investment decisions.

The All World Tax Advantage Group is a mutual fund corporation that currently offers approximately 20 different classes of securities. In addition to fund diversification by investment style, geography and market capitalization, a key benefit of investing in any of the classes within the group is the possibility of sharing incurred expenses (and losses) of the combined structure potentially offsetting income earnings to minimize chance of a dividend declaration. For a more detailed explanation, please see AGF.com/disclaimers.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an "as is" basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the "MSCI Parties") expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

Morningstar information © 2017 Morningstar Research Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. For more information see www.morningstar.ca.

Published Date: February 7, 2017