An “investment guy” as president

“The chief investment officer function is near and dear to my heart,” McCreadie says. “But the president’s role had been vacant for some time, and it’s a sign of the company’s priorities that they’ve put an ‘investment guy’ in that role.”

After a lengthy global search, AGF Investments plucked McCreadie from his former job as president and CIO of PNC Capital Advisors LLC of Baltimore to whip the AGF ship into shape. McCreadie has been at the helm of AGF since June.

AGF, a $37-billion Canadian investment fund firm, has been plagued by lagging performance in many of its investment products and the resulting wave of retail fund redemptions and institutional client defections. After more than two decades at the firm, former chief investment officer Martin Hubbes left the company last January, and the president’s chair has been vacant since Randy Ambrosie left in 2009.

McCreadie, who has more than 30 years of investment business experience, previously oversaw US$58 billion in assets under management (AUM) and led the institutional business at PNC Capital, a division of PNC Financial Services Group, one of the largest diversified financial services organizations in the U.S. McCreadie offers AGF the valuable combination of an ability to manage both money and people.

“I’m passionate about financial markets and have also picked up people skills along the way in my career,” McCreadie says. “I don’t just come to the job from the executive suite; I’ve done the investment manager’s job and am familiar with that side of the house.”

McCreadie’s experience includes portfolio construction and enhancing investment processes, as well as managing asset allocation and alternative strategies for clients. He began his investment career in 1982 in the management-training program at New York-based JPMorgan Chase & Co.’s asset-management arm, for which he ultimately became a large-capitalization U.S. equities manager.

McCreadie’s career has consisted of long stints in a few positions. When AGF came knocking, he felt he was ripe for a new challenge after 12 years at PNC. More important, AGF fulfilled McCreadie’s criteria of combining investment management with a global vision.

“The firm has a global platform, on both the investing and the client sides,” he says. “I was looking for a growth story, and AGF is committed to achieving that. I liked the fact that investment management is the company’s only focus in financial services, and all of its resources are dedicated to that end.”

McCreadie faces stiff challenges at AGF, which has suffered several years of AUM erosion and a corresponding drop in management-fee income. The firm reported AUM of $37 billion as of Aug. 31, up from $36.4 billion a year earlier but a far cry from the peak of $56 billion in 2007. For the year ended Aug. 31, AGF reported that its retail funds’ AUM grew by 5.2% to $19.9 billion – which, although positive, is substantially less than the mutual fund industry’s growth as a whole, which saw AUM increase by 22% to $1.13 trillion. AGF’s institutional AUM was down by 10% to $12.4 billion in the same period vs a year earlier. High net-worth (HNW) AUM increased by 22% to $4.4 billion.

According to Morningstar Canada data, only two of 49 AGF funds with a five-year track record had top-quartile returns as of Aug. 31: AGF Diversified Income Fund and AGF Monthly High Income Fund. And only 10 funds were second-quartile performers, leaving 37 funds in the bottom half. (The data track each fund portfolio once, and do not account for multiple purchase options.)

“AGF has been growing much more slowly than the industry as a whole,” says Rudy Luukko, investment funds and personal finance editor with Morningstar Canada in Toronto. “And, in large part, that can be attributed to performance that’s in need of improvement.”

Recently, there have been welcome signs of improvement at AGF. At the end of the third quarter, ended Sept. 30, AGF reported 46% of AUM was above the industry median on a one-year basis, up from 20% a year earlier. McCreadie says his next goal is to have 50% of AUM above the median for a one-year period, and 60% above the median on a three-year average annual return basis.

The three-year measurement is an influential factor in stimulating sales, and McCreadie believes AGF is within 18 months of its three-year goal.

Although net redemptions still are a problem, AGF reported that gross redemptions were 13% lower for the third quarter ended Sept. 30 than in the second quarter, and also were 37% lower than in the third quarter a year earlier. AGF has experienced 19 consecutive months in which AUM outflows were less than in the corresponding period in the previous year.

To help boost sales, AGF is developing a product shelf of alternative investments through a new joint venture with asset-management firm Instar Group Inc. of Toronto. This venture, called InstarAGF Asset Management Inc., focuses on infrastructure, real estate and energy investments for retail, institutional and HNW clients.

Also striking a positive chord are a handful of mutual funds launched in the past three years, including AGF Floating Rate Income Fund, three income-oriented AGF Focus-branded funds and the low-volatility AGF U.S. AlphaSector Class, collectively standing at $1 billion in AUM.

McCreadie is working closely with AGF’s investment team to apply other risk-management strategies to the investment process. And checks and balances are being put in place to ensure there are no disproportionate exposures to specific countries or sectors. The goal is to “refine and hone,” McCreadie says, adding that he is avoiding “micromanaging or weighing in on specific security selection” in favour of enabling AGF’s portfolio managers to “drive consistency.”

McCreadie believes there is an opportunity to expand AGF’s client base by customizing products to appeal to diverse geographical markets and a wider base of clients, including retail, institutional and HNW.

He also is looking to leverage relationships with AGF’s network of institutional-investment consultants. In late 2013, AGF opened a London, U.K., office to encourage participation in AGF products by British and European investors, and added to institutional sales and service offices in London (Ont.), Boston, Dublin, Hong Kong, Beijing and Singapore.

“We have the fabric and framework to build,” McCreadie says. “A lot of institutional clients want to reduce their home country bias with global strategies. My view is that we can take what we have and enhance and tweak it.”

Aside from the stimulating business challenges on McCreadie’s plate, he likes to talk sports and sprinkles his conversation with baseball analogies. His former home of Baltimore is well represented in baseball by the Baltimore Orioles; but, he adds, since moving to Toronto, he has been beefing up his knowledge of hockey.

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