AGF tobacco transfer troubles advisors

Some advisors are accusing AGF Investments of botching a fund transfer, raising questions about the company’s commitment to socially responsible investing.

AGF wound down its Social Values funds, which the company acquired when it purchased Acuity Investment Management in 2011, earlier this year. The two funds – AGF Social Values Balanced and AGF Social Values Equity – were merged with a pair of mainstream funds: AGF Traditional Income and AGF Global Equity.

The problem? Both AGF funds include tobacco companies. AGF Traditional Income has Imperial Tobacco in its top 10 holdings, while AGF Global Equity has Phillip Morris in its top 10.

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The transfers have angered SRI advisors. “It’s a slap in the face,” says Toronto-based advisor Sucheta Rajagopal. “The one thing people know [about SRI] is that we don’t own tobacco. So, it seems blatantly disrespectful to have chosen to roll the Social Values funds into funds with tobacco in their top 10 holdings.”

Cheryl Crowe, a senior advisor at Winnipeg’s Assiniboine credit union, calls AGF’s move “ridiculous” and “short-sighted.”

Crowe says merging the SRI funds with mainstream funds made little sense. “The clients I have will flip when they see tobacco in the portfolio.”

AGF executive vice president Gordon Forrester says the company selected mandates that were aligned from an investment objective standpoint, and communicated the changes through advisor and investor letters.

“We were very transparent that the funds the SRI funds were transferred into were not SRI-specific,” Forrester says.

Forrester adds an overwhelming majority of unitholders voted to support the fund mergers.

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Still, he says he’s willing to speak with advisors who are upset. “I’m not ruling any options off the table — we want to hear the specific concerns of the advisors involved.”

In a letter to AGF outlining her concerns, Rajagopal requests the merged assets have all DSC fees waived if redeemed within six months of the merger.

Commitment to SRI

A larger question surrounds AGF’s overall commitment to SRI. Crowe claims AGF has virtually ignored the Social Values funds since the Acuity deal.

“They paid little attention to these funds even though we were assured that SRI wasn’t going to go by the wayside. AGF didn’t put one stitch of SRI [promotional] material together — all the material I have has Acuity logos on it, and their [AGF] wholesalers knew absolutely nothing about SRI.”

Forrester rejects those claims. “[AGF portfolio manager] Martin Grosskopf and SRI was one of the reasons we bought Acuity and it continues to be a commitment for us today. We are in the process of hiring another analyst to work with Martin in that socially responsible space.”

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Forrester points to AGF’s Clean Environment Equity Fund, also picked up in the Acuity deal, noting that the closure of the Social Values funds allows AGF to focus specifically on the clean fund, a thematic product and AGF’s lone remaining retail SRI offering. “A number of advisors have moved their assets into the Clean Environment fund; they’ve seen the similarity of the mandate.”

But Crowe worries about the future of the clean fund. “They only have one fund now and it’s not appropriate for everyone. They’ve put no marketing into it, why would we put our clients into it?”