This fund is a part of the latest Morningstar Prospects. Read more about Morningstar Prospects here.
AGF Global Dividend Fund is a global equity fund that invests in dividend payers. According to AGF, the fund invests in high-quality dividend-paying companies, which contribute to historically lower volatility and better downside protection than peers. It is aimed at investors seeking the benefits of global market diversification and capital appreciation potential.
The fund came to Morningstar analysts Michael Dobson and Danielle LeClair’s attention because it offers consistent downside protection and strong risk-adjusted returns. “The fund achieved good long-term risk metrics relative to similar global dividend funds without sacrificing returns,” they say.
It is important to note that as a dividend-focused fund, AGF Global Dividend owns more value-tilted names, which means that it does not benefit from the massive run-up in growth stocks over the past few years. Dobson and LeClair note that the fund’s quality bias can make it look out of step with more aggressive growth-oriented global equity peers at times, such as in 2020. In fact, the fund has returned 1.04% year-to-date, while the category has returned 7.34%, and the index gave back 10.19%. In the past five years, the fund has underperformed its index in four.
Outperformance in the Long Term
The fund offers significant downside protection and an above-average yield. The average dividend yield for the category is 1.89%, while the fund has a dividend yield of 2.73% - an attractive proposition for income-seeking investors. Meanwhile, the average down-market capture over 5-years for the category is 102% vs. 74% for the fund. The down-market capture ratio is a measure of how an investment manager performs in down-markets.
If a fund manager has a down-market ratio of less than 100, it means she has outperformed the index. With a down-market capture of 74%, AGF Global Dividend managers have declined only 74% as much as the index, while its peers declined 102%.
Why is AGF Global Dividend Worth Considering?
“The fund focuses on dividend-paying companies that still have the opportunity and ability to earn returns on their investments greater than their cost of capital,” Dobson and LeClair write. Steven Way, who has managed the fund since its 2007 inception, recently added 10-year firm veteran Andres Perez as a comanager.
“The team's clearly defined and consistently implemented process uses quantitative and qualitative inputs to consider risk from multiple angles. Screens direct the team toward countries and stocks that meet specific valuation, growth, sentiment, and dividend yield criteria. It considers top-down factors to mitigate risk but allows stock selection to drive results. The firm’s central analyst team's bottom-up research emphasizes cash-based metrics that complement the fund's dividend requirements,” they say.
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