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AGF Management's (AGF.B-T) announcement on Monday that its star emerging markets portfolio manager Patricia Perez-Coutts is leaving the company is weighing on the stock, with AGF shedding $150 million in market capitalization.
Such a move has led Scotiabank analyst Phil Hardie to ask: "The $150 million portfolio manager, really?"
"While we had anticipated near-term weakness following the announcement, we believe the 10-percent decline [since Monday] in share price over the last two days is likely overdone," he said. "We believe current levels represent an attractive entry point for longer-term value investors."
Perez-Coutts was one of the company's top managers and a five-star-rated analyst by Morningstar and, Hardie says, one of the reasons the Emerging Markets fund was one of the top funds in its class. The fund managed around $2.08 billion for retail clients, or about 9.2 percent of total retail assets under management, and an undisclosed amount of institutional assets.
"AGF has suffered similar losses of high-profile portfolio managers over the past ten years, that when revisited, indicate the market is likely overreacting," he says.
Hardie points to the departures of high profile talent such as Christine Hughes in 2010, Charles Oliver and Jamie Horvat in 2008 and Charles Brandes, who oversaw its flagship International Value fund, in 2002.
"The most severe impact to fund flows experienced in these cases was outflows for the year following departure of 14 percent of assets under management (AUM). Applying this metric to the $2.08 billion overseen by Perez-Coutts would imply outflows of $290 million in the coming year," Hardie says. "Based on this analysis, we feel that while AGF is likely to experience a spike in outflows as a result of her departure, it is unlikely that the company will experience a complete loss of AUM that had been overseen by Perez-Coutts."
"In addition, the AGF Emerging Markets fund, the largest fund managed by Perez-Coutts, had also been experiencing weaker net sales of late, largely due to the global downturn in equity markets," he adds.