A Global Balance

01/12/2007 12:00 am EST

Focus:

Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

Scouring the world for investments that will help his subscribers diversify their portfolios and boost their returns, Gordon Pape looks to the Emerald Isle and finds a balanced fund of equities and income instruments that looks very promising...

"Tucked away in Dublin, Ireland, which has become a mini financial capital in the new Europe, AGF International Advisors Company Limited is headed up by John Arnold, a seasoned money manager with over 35 years of experience. Backing him up is native Irishman Rory Flynn, who serves as co-manager with Arnold on several funds, and a small but proficient research team.

"Arnold and Flynn were recently handed responsibility for the AGF International Value Fund, the one-time corporate flagship that fell on hard times after the Charles Brandes organization unexpectedly resigned the account in early 2002. Based on the historical record, any AGF fund managed out of Dublin is a good choice for a portfolio, thanks to the conservative value style of Arnold and Flynn. But right now my choice is the AGF World Balanced Fund because it gives the managers latitude to reduce equity exposure in weak markets.

"AGF World Balanced Fund is an asset allocation fund, which means the managers first decide on the appropriate asset mix before selecting individual securities. Once that has been done, they use a bottom-up value approach for selecting mid to large-cap stocks for the equity side of the portfolio. In theory, the asset mix can change quickly, but in reality it has been quite stable. As of the end of November, AGF reports the fund was 58% in European stocks, 14% in North American equities, and 1.6% (a surprisingly low allocation) in Pacific Rim securities. Short-term Canadian bonds accounted for just under 20% of the asset mix and the rest was in cash.

"The fund's performance record is outstanding. For the 12 months to Nov. 30, investors enjoyed a gain of 26.4%. The three-year average annual compound rate of return stands at slightly more than 15%. The fund was launched in October 2003 so it has not yet gone through a bear market. However, based on the performance of AGF European Equity Class, which this team has managed for more than a decade, I'm not overly concerned about that. The European fund lost money in only one calendar year of the 2000-2002 bear, a 7.8% decline in 2002. Since World Balanced is an asset allocation fund, the risk would appear to be even less.

"This is a first-rate fund for building the international side of your portfolio and adding more euro exposure. It would fit very nicely into an RRSP."

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