AGF's global-equity team led by Stephen Way has a new look this year, with five of the eight members having been with the company for only several months. But what hasn't changed, says Way, senior vice-president at AGF Investments Inc., is the investment process and philosophy.
"The process remains exactly the same," says Way, who has been an AGF portfolio manager for more than two decades. "It's very important for clients to have continuity, and that their past experience (as fund investors) should reflect future experiences, as the markets allow us."
AGF's hunt for global talent followed the controversial departure of emerging-markets specialist Patricia Perez-Coutts and four of her colleagues, who left the firm in early 2012 to join the new Canadian affiliate of Westwood Holdings Group Inc. WHG.
The reconstituted AGF team has a tough act to follow. During Perez-Coutts's tenure, the emerging-markets fund was a six-time winner in its category, starting in 2005, at what is now the Morningstar Canadian Investment Awards.
The five newcomers join Way and portfolio managers Alpha Ba and Thiery Jannini. The team's main responsibilities include the multiple-award-winning AGF Emerging Markets, AGF Global Dividend and AGF Global Equity Class.
Way is the lead manager for all three funds, and the sole manager on the global-equity mandate for which he has been responsible since 1995. While the team works closely together, the buck stops with Way. In the unlikely event of a disagreement, he says, "I'm the one who decides what stocks go into the portfolio."
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The AGF eight-member team in Toronto is, by design, as diverse as the countries and cultures that the global mandates represent. The group spans six different countries, speaks 12 different languages, and has more than 100 years of collective experience. Another member is expected to be added to the team in the first quarter of 2013.
Way says about 80% of the team's time is spent on fundamental research. They look for sound business models, attractive valuations and positive growth and momentum characteristics. Among the key metrics they favour are rates of return above cost of capital, and high cash-flow generation.
For the global-equity portfolio, the team's broadest mandate, Way and his colleagues initially scan a universe of more than 4,500 companies in 28 ranked countries. The companies are rated according to criteria that include liquidity, sector and political risk. Excluded from further consideration are companies with market capitalizations of less than $1.5 billion. Further analysis whittles down the number of possible candidates to a "watch list" of 600 to 800 names.
Among the 70 to 75 names in both the global and emerging-markets mandates, no individual stock represents more than 6% of the overall portfolio. Along with limiting stock-specific risk, the team also avoids big industry bets. The funds also typically invest in eight of the 10 main global sectors.
Way is very much a buy-and-hold type of investor. Historically, his annual portfolio turnover has been less than 20%, and over the past year it has been in the low single digits.
Before entering the investment industry, Way took some time off to travel overseas after receiving a bachelor of arts from the University of Western Ontario in 1984. He backpacked through Europe until May 1985. Returning home to London, Ont., he then moved to Toronto in September 1985 to work as a teller with the Province of Ontario Savings Office.
In 1986, Way moved to the Royal Bank of Canada, also as a teller. In September 1987, he joined AGF as a client-service representative. In May 1989, he was promoted to the investment department as a U.S. equity analyst.
In February 1991, Way moved to Dublin to set up AGF's European office, and also received the CFA designation that year. From 1991 to 1994, he was managing director of the Dublin operation, where he began managing European stocks.
Then in March 1994, Way returned to Canada to help launch AGF China Focus Class, and served as the firm's chief liaison for the externally sub-advised AGF Japan (terminated in February 2012), before becoming the manager of AGF Global Equity Class in May 1995.
Currently, Way is modestly underweight in the United States, which he does not find as attractive as some other countries. Looking at Europe, "my fundamental belief is that the euro will survive, and that the value opportunity that we're seeing in Europe is a long-term opportunity."
Over the long run, Way adds that emerging markets offer some of the best growth opportunities. "It makes sense for investors to deploy some money there because I think it helps to diversify risk."
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