AGF Agressive Growth looks bad

Zoomer | January 1st, 2006

Question: The Globe and Mail on Saturday January 20th listed the AGF Aggressive Growth Fund as one of its weekly “dogs.” You on the other hand have it pegged as “superior.” Given its drop from $60 to $25 in the less than a year, I would have to agree with The Globe. In a week when Nortel, IBM, Microsoft and many other “Big Boys” in the high growth tech sector gained in excess of 10% this fund dropped 11%. Not a very good sign. I think that you may want to re-evaluate your position. – J.S., Toronto

Answer:

Yes, this fund has been beaten up lately. But that’s the nature of this beast — it is very volatile. When things are going well, it will outperform the market by a huge margin. When things are going badly, like now, the losses will be magnified. But over time, investors have done very well — the five-year average annual compound rate of return to Dec. 31 was 32%.

Also, the numbers you mention are somewhat misleading. On Jan. 1, 2000, this fund had a net asset value (NAV) per unit of $42.34. On Jan. 1, 2001, the NAV was $29.40 — but this was after a distribution of $6.81 per unit. So the one-year price drop was actually $6.13 a unit, or 14.9%.&lt/p

We may see this fund continue in the doldrums for a while, until the markets turn around. But when they do, it will be a leader again. The Globe’s Stars and Dogs only take a short-term view. I prefer to take a longer perspective. As long as Richard Driehaus is in charge, this will be a volatile but superior-performing fund. However, it’s not for conservative investors and is not appropriate for an RRSP. – G.P.