| Fund Company | AGF Investments |
| Fund Type | Global Neutral Balanced |
| Rating | No Rating |
| Style | Growth |
| Risk Level | Medium High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Poor |
| TFSA Suitability | Poor |
| Manager | Tony Genua since May 1, 2013 Jean Charbonneau since May 1, 2013 |
| MER | 2.20% |
| Code | AGF 4074 – Front End Units AGF 4274 – Low Load Units AGF 4174 – DSC Units |
| Minimum Investment | $500 |
Analysis: In May of last year, AGF launched this very interesting balanced fund that is designed to mitigate the impact of inflation. To do this, it invests in an actively managed basket of AGF funds with underlying exposure to inflation adjusted fixed income and resource and commodity stocks. The target asset mix is set at 60% AGF Inflation Plus Bond Fund, 20% AGF Global Resources Class, and 20% AGF Precious Metals Fund. At November 30, it was underweight both bonds and precious metals, with an overweight to resources.
The asset mix is managed by the AGF Asset Allocation Committee that conducts formal reviews on a quarterly basis. It determines the outlook for each asset class and region, and then optimizes the portfolio by return, yield and volatility.
While the idea is very interesting, the timing of its launch really couldn’t have been worse. While the longer term outlook for inflation may be positive, there is very little near term risk. Add to this a relatively calm geopolitical environment, and it’s not hard to see why the fund has struggled. For the past year, the only fund of the three that has been positive was the AGF Global Resources, but it was only marginally in the black. AGF Precious Metals has been pummeled, dropping nearly 43% in the past year.
Understandably, with this backdrop, the fund has performed rather poorly. It is down 6.8% since its launch and was down 6.5% for the past year. This lagged both the benchmark and the peer group by a substantial margin. That doesn’t necessarily mean that this is a bad fund. Looking at the current environment, the performance isn’t out of line with expectations for inflation focused funds. The underlying funds have all performed in the upper half of their respective categories in the past year, but combining them into one balanced fund has been disastrous when compared to other balanced funds that don’t have the inflation focus mandate.
Looking at the outlook for inflation, I don’t expect there to be much of a change in the short term. Longer term however, with all the liquidity that has been injected into the global economy, there may be increasing pressure on prices. Under that backdrop, I would likely avoid this fund in the short term, but it might be something to take a look at down the road.