Ethnic and gender diversity among portfolio managers has not, until recently, been seen as a competitive advantage. Well, the times they are a changing. For global and emerging markets managers, this should have been the case long ago.
Steve Way, a senior vice president and lead portfolio manager of Toronto-based AGF Investments, where he has worked for 30 years, is proud of the diversity of his team. He says: “Diversity matters. It’s not just because they can converse in different languages, as the management of the companies in which we invest do. It’s because of their backgrounds and understanding of different markets, too.”
Mark Jackson, AGF’s Australian representative, says the diversity of the firm’s team is “definitely a competitive advantage”. He says: “I recently spent two days in Toronto, talking to everyone [at AGF]and I could sense the difference in the way they were talking about the world.”
Way joined AGF, a family controlled firm, in 1987. He established the international strategies, which he still oversees, in 1991. He is the largest “non-family” shareholder in the firm, which dates back to the 1950s. The family, the Goldrings, is led by chairman and chief executive, Blake Goldring. AGF launched the first mutual fund in Canada to invest in the US market, in 1957. ‘AGF’ stands for the ‘American Growth Fund’, which became the company’s namesake.
On a visit to Australia last week, Way said: “Aside from North America, we have been successful with clients across Europe, in Italy, Denmark, the UK, as well as [South] Korea and Asia Pacific. We have offices in Ireland, London, Singapore, Beijing and a quant investment team in Boston. Our origins in China go back to the 1990s when we launched a fund there. We have been active in China and Asia for more than 20 years. We are truly global.”
AGF has about C$35 billion under management, C$7 billion of which is in global and C$1 billion in emerging markets. “Although it’s a family-controlled firm, we have disclosure levels commensurate with those of a public company,” Way says. AGF Management, the listed company, has about 900 employees worldwide.
The two key drivers of returns for the investment strategies are stock selection, using ‘economic value added’ analysis, which accounts for about 70 per cent of the alpha generated in the past 20-or so years, and a proprietary ‘country allocation framework’, which is mostly to do with top-down country selection.
“For our global investors, we have not had any below-benchmark returns, in rolling five-year numbers, this century,” he says. “The consistency of our returns is tied to our investment process… Both our developed markets and our emerging markets portfolio managers are integrated in the one team.”
The portfolio has a high ‘active share’ of stocks which are either outside the benchmark or highly deviant from the benchmark weight – in the 85-plus per cent range – and a very low turnover – around 15 per cent annually.
The manager’s style blends both growth and value. “We are broadly exposed to different styles,” Way says. “The best stocks are value stocks that become growth stocks.”