Fund managers look good

There will be a new team in charge of one of Canada’s largest mutual funds by the last week of June.

Responsibility for the multi-billion dollar AGF International Value Fund is being handed over to Harris Associates L.P. of Chicago.

The company is taking over from the Charles Brandes firm of San Diego, which announced in March it was resigning to clear the way for the launch of its own fund group in Canada.

Similar manager style
Like Brandes, Harris Associates is a value manager. They run the Oakmark group in the U.S., which contains seven funds.

The closest one to AGF International Value is Oakmark Global Fund, which shows a year-to-date return of 8.75 per cent.

By comparison, AGF International Value is down 6.29 per cent year-to-date under the Brandes leadership.

However, there is a huge difference in the size of the two funds. Oakmark Global has about US$175 million in assets, while AGF International Value has $7.4 billion.

<STON>Large portfolio experience
The company’s core Oakmark Fund does rival the AGF entry in size, however, at US$4 billion, so Harris does have experience with large portfolios.

Based on this, I feel that investors in AGF International Value should maintain their positions and give the new managers a chance to prove their worth.

International fund change
Portfolio responsibility for AGF International Stock Class, also managed by Brandes, has been given to AGF International Advisors, which is based in Dublin.

This is the same organization that runs the AGF European Equity Class and AGF World Balanced Fund.

AGF European Equity is one of those undiscovered gems of the mutual fund world. It has never recorded a losing year since its inception in 1994. It even managed to turn a tiny profit in 2001 at a time when most Europe funds were deeply into the red.

It has outperformed both its peer group and the MSCI Europe Index by a wide margin over all time periods, and has done so with below-average risk. That’s a remarkable accomplishment.

Next page: Choice seems inspired

Choice seems inspired
Since European stocks normally form the core of any international fund, this managerial appointment by AGF looks inspired. I recommend that you hold your positions here.

The new team may actually do a better job than the Brandes people. That’s not to disparage Brandes in any way. This fund has been much better than average in its category. But the folks in Dublin have really shown that they know their business and I think they’ll do just fine.

Emerging markets volatile
The third Brandes fund is AGF Emerging Markets Value, a small entry with only $44 million in assets.

In this case, management is being brought in-house with responsibility being given to Patricia Perez-Coutts. She has done a credible job with the AGF Latin America Fund since taking it over last year.

But to me, this is a non-event. Emerging markets funds are far too volatile for my taste and tend to be underachievers over the long term.

Most investors should simply ignore them.