Toronto-based AGF Investments Inc. Monday announced that it will be temporarily capping all purchases and switches into the AGF Monthly High Income Class, as of April 2.
The move is in response to the March 21 federal budget regarding the use of forward contracts for the purposes of converting income returns to capital gains.
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AGF says it is pursuing this temporary course of action in order to protect the integrity of the All World Tax Advantage Group (AWTAG) and act in the best interest of existing shareholders of the corporation.
“We have undertaken this temporary measure in order to protect the interests of our investors,” said Gordon Forrester, executive vice president, marketing and product, head of retail. “Until we receive clarification on these new regulations, we believe the prudent move for us is to protect existing shareholders from any potential uncertainty.”
The federal budget announced that returns on Yield Class funds earned from the reference funds via forward contracts would be treated as ordinary income rather than capital gains. In order to limit the exposure to risk, this cap on the AGF Monthly High Income Class will remain in effect while AGF works with the government and regulators to understand the full implications of the change. As of the end of February 2013, AGF’s AUM in AGF Monthly High Income Class was $22 million.
AGF Investments is affiliated with of AGF Management Ltd. (TSX:AGF.B).