EUR 850.00 For Business Accounts Only

Morningstar | Outflows Mar AGF Management's Fiscal 3Q Results; Maintaining CAD 7.50 per Share FVE

There was little in no-moat-rated AGF Management's fiscal third-quarter results that would alter our long-term view of the firm. We are leaving our CAD 7.50 per share fair value estimate in place. Total AUM increased 11.1% from the year-ago period, leaving AGF with CAD 38.8 billion in managed assets at the end of August. Mutual fund net outflows of CAD 9 million were a letdown compared with the second quarter (when AGF Management posted CAD 100 million in inflows), but still better than both the first quarter of fiscal 2018 (negative CAD 68 million) and the year-ago period (negative CAD 40 million).

We continue to believe that improvements in AGF Management's investment performance will be the real driver of future flows for the firm, especially on the mutual fund side of the business. Despite finally surpassing management's goal of having more than half of retail AUM outperforming peers on a one-year basis, and 60% outperforming on a three-year basis, at the end of last year, the firm has taken a big step back this year, with just 14% and 27% of funds, respectively, above median levels during the second quarter (compared with 50% and 53%, respectively, in the prior year's period) and the company choosing not to disclose data for the fiscal third quarter. As we've noted in the past, it will take sustained levels of peer-beating performance for AGF Management to start generating positive flows on a consistent basis.

While average AUM was up 7.9% year over year, revenue increased just 5.6% because of fee compression and product mix shift, as well as slightly lower deferred sales fee revenue being collected year over year. The revenue decline had an impact on third-quarter profitability, with the company's EBITDA from continuing operations coming in at less than 28% of sales, which is basically in line with our expectations for fiscal 2018.

AGF Management also announced that current chairman and CEO Blake Goldring will step down and assume the role of executive chairman at the start of December, with Kevin McCreadie, AGF Management's current president and CIO, assuming the chief executive role, and Judy Goldring, the firm's current COO, taking on the role of president. Blake Goldring has been AGF Management's CEO since 2000 and chairman of the company's board of directors since 2006. He joined the firm in 1987 and held senior positions before becoming president in 1997. His father, Warren Goldring, co-founded the company in 1957.