With his recent appointment as manager of AGF American Growth Fund, Tony Genua has landed an important role in the strategy to turn around the fortunes of Toronto-based AGF Funds Inc.

“I’m excited about the opportunity to bring the flagship fund back,” says Genua, a 27-year money-management veteran who joined AGF in mid-January after six years as a principal at KBSH Capital Management Ltd.
of Toronto. “I bring a long record of experience and a history of beating the market. Investors will be rewarded by patience.”

AGF has been plagued by redemptions across its product line for the past three years, and American Growth Fund represents a significant chunk of assets.
The various load versions of the fund total about $1.2 billion, says Genua, senior vice president at AGF.

Until Genua took over, the fund had been managed by Steve Rogers for 18 years. But the past five years have seen the fund stumble, and weak performance dragged down even its long-term numbers. For the past five years on Rogers’ watch, the fund had an average annual loss of 13%,
significantly worse than the category’s average loss of 6% and the Standard & Poor’s 500 composite index’s loss of 5% in Canadian-dollar terms.

American Growth Fund, which was launched in 1957, is the company’s founding product — AGF takes it name from the fund’s initials — and a forerunner of the Canadian fund industry.

“The fund was not showing performance consistent with a ‘growth’ style,” says fund analyst Dan Hallett, president of Windsor-based Dan Hallett & Associates Inc. “The fund has a lot of assets in it, and I assume there’s a strong desire to get it back on track.”

Along with portfolio manager Cameron Scrivens and analyst Coulter Wright, Genua is also in charge of AGF Global Technology, AGF Global Health Sciences and AGF Special U.S. Equity, bringing the total U.S.
assets under his watch to US$1.3 billion.
The market appeal of this asset class has increased with the impending removal of foreign-content restrictions proposed in the latest federal budget. Genua has also managed money for Canada Trust and for the Wall Street office of RBC Dominion Securities Inc. Before KBSH, he was vice president and research director at Scotia Investment Management.

Fund analyst James Gauthier at Dundee Securities Corp. applauds the change in management after several years of underperformance. “Genua isn’t a well-known name,” he says, “but fresh blood will be beneficial. It will be a while before we see things turn around, but the change in management is positive.”

There is little doubt that Genua has a challenge ahead in reviving a loser and stemming redemptions, and he’s not wasting any time getting down to business.
He doesn’t believe in “holds” when it comes to investing in stocks. A company he wouldn’t buy at today’s prices is a “sell.”

“I start every day with a clear sheet of paper and every stock must meet my ‘buy’ criteria,” he says. “The habit keeps me objective and disciplined. New investors are always buying into the fund at today’s market values, and I want to make sure that every stock in the portfolio will sing a merrier tune than in the past.”

Although he liked about 30% of American Growth Fund’s portfolio when he took over, by the end of March he had evicted all of the stocks he didn’t like and replaced them with his favourites.

He was quick to sell the fund’s previous biggest holdings — Microsoft Corp., United Technologies Corp. and IBM Corp. — replacing them with more innovative names, such as Apple Computer Inc. and Google Inc. The fund previously included no names in the energy sector; Genua has brought the weighting up to 8.5%, including the addition of Transocean Inc. to his top 10 holdings.
Other additions to the top 10 include Starwood Hotels & Resorts Worldwide Inc.
and health-care firm Medtronic Inc.

He has increased the number of sectors represented in the fund to seven from five, adding 1.4% of assets to materials, in addition to his new energy holdings. He has increased the fund’s emphasis on
consumer discretionary and financial stocks, while decreasing health care, industrials and infotech.

He likes to have 30 to 50 companies in the fund, with a market capitalization of US$50 billion-US$80 billion. He avoids companies that are not shareholder-friendly in terms of their strategy for issuing stock options or non-voting stock, and focuses on innovators that are leaders in their fields, typically on a global basis.