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New hire is proof that AGF is getting serious about ETFs

A view of the financial district in Toronto.

Brent Lewin/Bloomberg

Anyone who still questions AGF Management Ltd.'s commitment to its nascent exchange-traded fund strategy need only study the company's latest hire.

Little noticed last week was the news that AGF hired Karrie Van Belle as a senior vice-president and head of marketing and communications. Ms. Van Belle's previous job at BlackRockAsset Management Canada Ltd., the dominant global ETF manager with over $1-trillion (U.S.) invested in its low-cost iShares funds, speaks volumes about AGF's intent.

Roughly a year ago, there was little more than speculation that AGF was likely to get into the ETF game, fuelled by its acquisition of Boston-based asset manager FFCM LLC, which had $1.4-billion in assets under management. Over the span of 10 months, those whispers have morphed into a full-blown roar, with AGF filing early paperwork in September to formally launch seven new low-cost funds next year.

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The move comes as AGF grapples with how best to evolve from the era when it was a Canadian mutual fund giant. Since the financial crisis, the company has wrestled with a steady stream of investor fund outflows, and now low-cost funds, in which AGF never specialized, are becoming the norm across the entire asset management industry.

Amid this shift, AGF is jumping on the ETF train – something that has the potential to cannibalize its existing mutual fund business. However, rival fund managers are doing the same, and it's getting tougher for asset management companies that don't offer these low-cost products to compete, because there is a growing proportion of the population that wants them.

But getting traction for new ETFs is tough in the current environment. Canada is already home to some of the world's largest ETF companies, including BlackRock and Vanguard, and a growing list domestic Big Six banks have launched low-costs funds of their own, including Bank of Montreal and Toronto-Dominion Bank.

A flood of new players has also entered the field, including Sphere Investment Management, Mackenzie Financial Corp. and Hamilton Capital Partners. Amid so much competition, marketing and outreach is crucial. Ms. Van Belle comes from one of the companies that's been most successful at it.

Exact details on AGF's new ETFs are still to be released, but the expectation is that they will be actively managed – meaning they will be somewhat similar to mutual funds, but lower cost – and their management fees will likely fall between 50 basis points and 75 basis points. (A basis point is 1/100th of a percentage point.)

The funds will support three dominant investing themes, executives said when AGF last reported earnings: lower risk, lower volatility and a global focus.

Because AGF's management is so focused on the ETFs, new products from traditional mutual fund business are unlikely until mid-2017.

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As part of the release announcing Ms. Van Belle's hire, AGF also said that Jay Bhutani, who has been with the fund manager for almost a decade, is its new head of ETF strategy.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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