With the recent announcement of the pending departure of Martin Hubbes as executive vice-president and chief investment officer, the search is on at AGF Investments Inc. for a new leader to oversee its investment teams and portfolio sub-advisor relationships in Canada and overseas. Hubbes is staying on for an unspecified period during the transition to his successor, who will oversee more than $34 billion in retail and institutional assets under management (AUM).
“We’re looking for someone who can take the investment division to the next level and build on what Martin has put in place,” says Gordon Forrester, executive vice-president, marketing and product at AGF Investments Inc. ” Hubbes departure was announced on Dec. 17.
AGF has no specific timetable for replacing Hubbes, though it would appear likely that a successor would be appointed sometime during the first or second quarter of 2014. “This search is a priority for us,” said Forrester. “At the same time, we want to take time and do it in the right manner and get the right person.”
The key challenge for AGF’s next investment chief will be to improve investment performance on a number of fronts. As noted in the current stewardship report for AGF produced by Morningstar’s fund-analyst team, AGF’s funds have mostly been average to below-average performers in their peer groups. The report noted that for the trailing three- and five-year periods through September 2013, fewer than 20% of AGF’s funds beat their respective category averages, while approximately 60% landed in the bottom quartile of their peer groups.
More recently, based on the November reporting period, a disproportionately high number of AGF funds have a below-average Morningstar rating for their historical risk-adjusted returns. Of the 84 distinct mandates with star ratings (a count that excludes multiple purchase options of the same fund) 48 funds had below-average ratings of one or two stars, 21 had three-star ratings and 15 had above-average ratings of four or five stars.
Of AGF’s 10 largest funds, only AGF Monthly High Income and AGF Emerging Markets funds have an above-average Morningstar rating. And the latter fund has been under new management since May 2012, when five global-team members led by Patricia Perez-Coutts quit AGF to become the investment staff of a new Canadian subsidiary of Dallas-based Westwood Holdings Group Inc. (NYSE:WHG).
Coinciding with the generally weak performance — three of AGF’s four largest funds are fourth-quartile performers over the 12 months ended Nov. 30 — AUM growth at AGF has stalled. Despite robust equity markets, AGF’s total retail-fund AUM including pooled funds have fallen to $19.6 billion at the end of November, down 2.5% from $20.1 billion a year earlier. Total AUM, including institutional accounts, have fallen to $34.4 billion, down 12.2% from November 2012.
The decision to replace Hubbes brings to an end his 20 years as a member of the AGF team, dating back to when he was hired as an equity analyst in 1992. Focused primarily on domestic equities, he became a portfolio manager in 1996. He served as lead manager of AGF Canadian Stock Fund, the firm’s domestic equity flagship, from August 1996 until the end of September 2011. In June 2005, in addition to managing portfolios, he was appointed CIO to lead the Toronto-based AGF team of managers.
Hubbes’s responsibilities at AGF peaked in December 2011, when he took over from the retiring Robert Badun as executive vice president of investments. At the time, AGF praised Hubbes as having played a “pivotal role in building AGF’s world-class investment management organization.”
In his expanded role as executive vice president, Hubbes assumed responsibility for investment teams at overseas affiliates in Dublin and Singapore, which like AGF Investments are subsidiaries of AGF Management Ltd. (TSX:AGF.B). Hubbes also took over Badun’s oversight role for investment teams at subsidiaries of AGF Investments, namely Acuity Investment Management Inc., Cypress Capital Management Ltd. and Highstreet Asset Management Inc., as well as third-party sub-advisors.
Among the external portfolio managers are Vancouver-based Connor Clark & Lunn Investment Management Ltd., which manages the $2.24-billion AGF Canadian Large Cap Dividend, the firm’s largest mutual fund, and F-Squared Investments, the Boston-area firm that manages AGF U.S. Alpha Sector Class Fund, which was launched in August.
Blake Goldring, chairman and CEO of AGF Management, praised Hubbes for his two decades of service. “Martin has embodied AGF’s core values of integrity, client focus, professionalism and teamwork,” Goldring said in a release. “Working closely with his senior leadership team and AGF’s executive, Martin has engaged the talent and built the structure required to ensure our investment management team has the tools and resources they need to succeed. I want to express my heartfelt thanks to my long-time colleague and wish him the best in the next chapter of his professional career.”