An investment that books big returns over a particular period can mask the fact that it is a poor performer over the longer term.Günay Mutlu
When will the pain stop?
That's the question executives at AGF Management Ltd. must be asking themselves. In their third-quarter results, released Wednesday, the company announced that assets under management fell 15 per cent in the past twelve months, from $48-billion in August 2011 to $41-billion this year.
This drop isn't catching anyone by surprise. The company has diligently announced AUM each month. But investors and analysts keep waiting for a turnaround, and the latest results don't do much to assuage their fears.
There are some bright signs, such as growing AUM for high net worth clients by about 3 per cent, or $3.4-billion, over the year prior. But for the most part, AGF acknowledges that bleeding assets is hurting them. Revenue from continuing operations dropped 21 per cent last quarter over the year prior, something that AGF said was "driven by lower AUM levels."
The question now is how much patience current investors have. Earlier this month they were given some hope, when AGF announced that it would buy back even more shares, using proceeds from its sale of AGF Trust. Doing so would boost earnings per share and ensure that its dividend payments were sustainable. That sent the shares soaring about 15 per cent.
But even before the latest results came out, about half of those gains disappeared. The company's big hope now is that those who remain invested are in it for the long haul.
Tim Kiladze