Thiery Jannini, co-manager of the $758-million AGF Global Dividend, looks for companies that offer sustainable shareholder value.
"The key differentiator is the fact that we focus on economic profit," says Jannini. "Typically, dividend mandates will have large exposure to utilities and large exposure to telcos, and you will not find that in our fund."
According to Jannini, utilities and telecommunications companies generally have a harder time covering the cost of capital, so it's more difficult to find companies that meet the team's value-creation requirement.
Instead, they've found opportunities elsewhere, with financial services representing about 24% of the portfolio. "I have a great understanding of the financial sector," says Jannini, "and the financial sector is the largest sector in the benchmark, so knowing that sector is a big strength."
Jannini is a vice-president and portfolio manager at Toronto-based AGF Investments Inc. He has co-managed AGF Global Dividend, along with veteran manager Stephen Way, since April 2012. In-house research is carried out by three portfolio managers, including Jannini. There are also six sector-specialist analysts.
Jannini says "the three C's" -- country, company and control -- describe key elements of AGF's investment process for global equities.
He and his colleagues start with an overall view, employing a country-allocation model based on the risk profiles, growth and valuations of each country.
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Next is the company selection process, which involves taking a growth-at-a-reasonable-price (GARP) approach. The team seeks to identify stable companies with strong balance sheets. "Stability of cash flow is key as well," says Jannini, "giving them the ability to pay a dividend."
Risk control represents the third C. It's the result of seeking companies with "economic value added" that have competitive advantages. Even in cyclical downturns, these companies would tend to do better than their peers, Jannini adds.
In AGF Global Dividend, says Jannini, "we don't just go for the high yield because that is tied to higher risk sometimes." The team studies the company's business model to evaluate its ability to generate sustainable and growing dividends.
One example of a current holding is Williams Cos. Inc. WMB, which Jannini describes as "a pipeline company in the U.S. that is more stable than, say, a pure oil company that is more cyclical." About 75% of the company's business is fee-based, which Jannini says makes it more stable than an exploration-based oil company. As well, "they've grown their dividend at something around 27% a year for the last five years, and the yield is good too, at 3.7%."
Among the top holdings is Hannover Rueck SE, a re-insurance company in Germany. "Hannover is a financial company but it's less cyclical than a commercial bank," says Jannini. "So this is another example of how we look for stability in the earnings."
From a geographic perspective, AGF Global Dividend can invest in 28 countries and would typically hold shares of companies that are domiciled in 18 to 20 countries. Currently the fund is weighted approximately 35% in the U.S. and about 26% in the Eurozone, the world's two largest economic blocs.
To help provide diversification, says Jannini, the portfolio is exposed to at least eight of the 10 major sectors. Also, the maximum individual weight among the 70 to 80 predominantly large-cap holdings is 6%. Portfolio turnover tends to be low, with Jannini estimating that he expects it to be around 20%.
Jannini, 41, received a bachelor of science in accounting from Université Quisqueya in Haiti in 1996. Pursuing further studies, in 1999 he received a master's degree in finance from HEC Montreal. He also did a master's thesis in business valuation, which he considers an added strength to the portfolio. Then in 2006, he received the CFA designation.
From 2001 to 2006, Jannini was with RBC Financial Group, where he held progressively senior positions in corporate development, profitability analytics and financial strategy. From 2007 to 2008, he was director of strategic financial analysis at Manulife Financial. Then in May 2008, he moved to AGF, joining the global equity team as an analyst on the global dividend and global core mandates.
Like other AGF managers, Jannini is required to hold a portion of his own assets in funds that he manages. He says most of his personal investments are in AGF Global Dividend. "People say, you're putting all of your eggs in a single basket," says Jannini, "and I say, it's not a single basket. I have investments in companies in 20 countries. Because it's so diversified, I think gives you less risk."
