AGF Management Limited Earnings Call Nuggets: Global Products and Institutional Business

AGF Management Limited (AGF.B) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Global Products

Geoffrey Kwan – RBC Capital Markets: First question I had was just on the retail side of the business, I know you talked, Blake, a little bit on the flows and I think what the industry flows that you’re showing bond funds not doing well, dividend fund more recently not doing well. On the equity side – staying with the equity side it has been the Global in the U.S. equity. Can you talk about what you guys have been seeing today? Is that the same for you guys or are you seeing different experience?

Blake C. Goldring – Chairman and CEO: I would say that certainly Global products continue to be a real bright spot, certainly our Global dividend net sales increased significantly year-over-year. Our U.S. as well as – American growth fund and U.S. AlphaSector Class those sales have also been very encouraging. So, I think that those are general trends that we’re definitely seeing. The Floating Rate Fund as well as – several people being concerned about the rising interest-rate environment we found that this has been a very key area for us as well.

Geoffrey Kwan – RBC Capital Markets: Switching to Smith & Williamson, Bob, I had a question in terms of when you talked about the dividend, where you talking about on the quarter-over-quarter or year-over-year? Then also on Smith & Williamson, just given that the markets have been better, are you guys with the other shareholders been revisiting potential monetization of that asset, whether not it’s potential sale or an IPO?

Robert (Bob) J. Bogart – EVP and CFO: With respect to the first part of the question Jeff, it would be increased on a quarter-over-quarter basis and we get the dividends twice a year, so the next one we scheduled in October. The latter part that – that strategic review is an ongoing review with management, I would say that their preference in the short term is probably not to monetize in the sense of an initial public offering, although that’s something that I know has been on the strategic docket in the past and maybe brought to light in the quarters to come with the improving markets in the U.K. but at this point in time there are no plans…

Geoffrey Kwan – RBC Capital Markets: And your comment around the dividend versus the NCIB but specifically on the dividend, were you talking to just making – ensuring that the free cash flow in the balance sheet is just supporting the current dividend or was in the context of a potential increase, like may be at some point over the next 12 months?

Robert (Bob) J. Bogart – EVP and CFO: I think it was the former in terms of just supporting the existing dividend.

Geoffrey Kwan – RBC Capital Markets: And the last question I had was just your comments around looking at the alternative space. Is – recognizing you may be just kind of early stages of exploring – expanding into this part of the market. Are you able to say whether or not this would be something that you think you have existing capabilities to leverage the existing managers to do that or is this something where you may need to hire people, teams or something along those lines?

Robert (Bob) J. Bogart – EVP and CFO: Right. It would be the former. So, the type of alternatives that we’re considering could not necessarily be in-house capabilities. We would pursue external individuals to assist in that effort.

Institutional Business

Paul Holden – CIBC: First question is related to retail flows and sort of more of a point of clarification. So the $100 million you got in Global Mandates in Q3, is that effectively fund of fund rebalance where you were awarded the mandate?

Robert (Bob) J. Bogart – EVP and CFO: Yeah, that’s correct.

Paul Holden – CIBC: Next question will be related to the institutional business. So you did a very thorough job of explaining why you think net flows on that business should improve going forward. But maybe you can just take a step back and look at the business what happened over the last year, because I think at the end of fiscal 2012 you were little bit more positive on the prospect for growing that business in the current fiscal year. So, maybe where did the business deviate from original plan over the last year?

Blake C. Goldring – Chairman and CEO: I guess, two things; one, is the more macro environment for the emerging market appetite among institutional investors had softened because of – obviously, there would be questions about tapering that I mentioned in my comments. So, that would be on sort of the inflow side and then there were still some, I am going to call, legacy products that were being redeemed – that might not go, but they did. But EM demand still remains strong and our Global fund pipe is also robust.

Paul Holden – CIBC: So, EM demand was softer than you expected over the last 12 months, but you expect that will change going forward?

Blake C. Goldring – Chairman and CEO: I think so. Again, I think, though, Paul, from where we started. I think last year we only done basically $2 billion of gross sales, which is again a pretty commendable showing.

Paul Holden – CIBC: Can you tell us how much AUM you have in emerging markets on institutional side?

Blake C. Goldring – Chairman and CEO: We don’t actually disclose by mandate other than the aggregate amount.

Paul Holden – CIBC: I’ll rephrase the question would you say that you’ve retained a significant amount of the AUM, since the prior PM departed on the institutional side?

Blake C. Goldring – Chairman and CEO: Yeah, there is no question there and let’s say, it’s extend that more recently there have been any movement is purely related to probably the more macro issues, but interestingly, at the same time, we have other clients that are looking at this as a great time to reposition and move into emerging market. So, I mean, you can’t say that people are completely uniform or different groups that we’re dealing with around the world are thinking all the same things at the same time.

Paul Holden – CIBC: So you still focus really on the Global dividend and emerging markets on the institutional side in terms of building the pipe, and of course the UCITS that comes with that?

Blake C. Goldring – Chairman and CEO: Absolutely, I mean those were the near-term areas that we’re seeing a real great, great success and certainly on the EM side, I mean at the current rates, I mean I think what we fall in three years as far as our capacity.

Paul Holden – CIBC: Then final questions related to the Floating Income Rates Fund. Obviously, you had tremendous success with that fund and it’s probably well-timed and I think as a result of that you’ve seen a number of your competitors come with a similar product. Has the introduction of competing products in your view impacted net sales at all or how do you think about the competition on that fund going forward?

Blake C. Goldring – Chairman and CEO: Well, I mean, no strangers daily competition and I guess there is no greater complement than imitation, I guess they always say, but certainly, there has been no impact that we’re seeing on, in our flows in this area and frankly we see there is actually a lot more opportunity, I mean it just continues to grow. Bear in mind, our partner Eaton Vance with whom we have a reciprocal relationship down in United States – with our resource expertise that we provide them, I can tell you that they’ve been in this business for a long, long time and they are the dominant player in United States and bring that sort of expertise along with our abilities here I think that combination is very, very strong.

Robert (Bob) J. Bogart – EVP and CFO: The only thing I would add to that, Blake, is that there’s a fairly – we’ve only touched a fairly small percentage of the advisors that are able to sell that product off. So, I think, we can dig wide, as well as dig deep with respect to that.

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