The company’s chief investment officer, Kevin McCreadie, tells WP how the company plans to expand
Until recently, AGF Management Ltd had focused its efforts on three core business pillars: retail, institutional and high-net-worth. Now, in an attempt to diversify its business, the company is looking to two new areas for growth: infrastructure funds and ETFs.
After launching a $230 million midstream energy infrastructure fund at the end of 2014, AGF is currently closing on its second infrastructure fund. “This fund will be bigger and has a targeted size of $750 million,” explains AGF’s Chief Investment Officer Kevin McCreadie. “Our institutional clients are increasingly demanding that asset class and in two years we’ve gone from zero to almost a billion dollars of committed capital. As well as helping us meet client demand, these funds further diversify the business model so we’re not reliant on any of the three core buckets.”
The infrastructure funds are delivered through InstarAGF, a joint venture between AGF and infrastructure experts Instar Group Inc. The new fund, the Essential Infrastructure Fund, has made commitments to three investments: a passenger terminal at Billy Bishop Toronto City Airport, a set of wind farms in BC and a midstream energy services company in Western Canada. “The fund has a ten-year life stream and we expect returns for those assets to be north of 12%,” says McCreadie. “They also create good income along the way and correlate very differently to the core public parts of an investor’s portfolio.”
McCreadie celebrates his three-year anniversary at AGF this month and says that the time has flown by. He sees the firm as being more globally tilted in its investments than when he joined, a fact McCreadie thinks will become increasingly significant as more investors realize the importance of ignoring old-fashioned home biases.
Although the firm is actively diversifying with its forays into the alternative space and ETFs, McCreadie is quick to point out that AGF is not diminishing its focus on the retail side of the business, which represents around half of the firm’s assets. “Retail is changing and it will always be important to us, but we also like the opportunities created by these two emerging platforms,” he says. “Retail remains important to us but the ability to diversify and go back to our global roots is equally important.”
AGF launched seven actively managed ETFs in January, four of which are multi-factor funds focused on emerging markets, international equity, Canada, and the U.S. The products are, according to McCreadie, the next generation of ETFs.
“They are active products that take all of the classical investment factors into one model, marry that to a stock selection capability and then wrap it in a risk optimizer,” McCreadie says. “These four ETFs are enhanced, multi-factor building blocks. On top of those, we launched three other ETFs with true open architecture. They are global equity, global balanced and global income solutions.”
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