Equity and Credit Market Headwinds Continue to Pressure AGF's Flows and Market Gains

While AGF Management's struggles are far from over, we believe the firm is on the right track. Long bouts of investment underperformance and increased competition have weakened the firm's competitive position in the Canadian market over the past decade. The company also relies more heavily on third-party distributors than its peers, with the Big Six banks and insurance companies (which handle the bulk of fund distribution in Canada) looking to expand their own fund manufacturing operations. While embedded commissions have endured, we expect the growth of fee-based accounts and increased transparency around fees and performance to put pressure on active managers with higher-than-average fees and below-average performance.