Financial Post
Hedge fund managers optimistic despite gloomy summer
The Canadian hedge fund industry has ballooned in the past few years, with some estimating annual growth at 30%. But there is still plenty of room for more, given that plenty of the strategies, such as risk arbitrage, that have proliferated in London and New York have not yet arrived here.
A near full house at yesterday's Canadian Hedge Fund Managers Speak With Investors forum demonstrated that the industry, now pegged at about 200 separate funds in Canada, is alive and well regardless of the recent turmoil. Much of this is being driven by institutional investment.
Despite so much volatility in the markets in the past two months, and the fact that some feel fundamentals have "gone out the window," Canadian hedge fund managers at the forum, owing perhaps to having less leverage than their U. S. counterparts, remain upbeat. "The response from investors was outstanding. They are looking for some understanding and this is a perfect venue for that," said Karen Azlen, CEO of Introduction Capital, who organized the event.
With August returns for many Canadian funds in the -20% range, and even worse results expected for some in September, unstable markets are clearly causing pain. As a result, hedge funds are facing the prospect of investor redemptions as the end of the quarter quickly approaches.
One manager said he hopes the U. S. bailout plan is approved by Congress quickly, as it could produce a much-needed end-of-quarter rally.
Like other investors, hedge funds are coping with challenging dynamics, such as rising prices for lousy companies, as managers are forced to unwind their short positions. At the same time, redemptions are forcing some managers to sell companies they like.
But forum attendees expressed hope that some sort of normalcy will return, bringing with it a sense of opportunity. Yet the rules have clearly changed, and regulation for the hedge fund industry seems inevitable. One manager in attendance suggested that new short-selling rules could become permanant, as regulators target hedge funds with "a new Sarbanes Oxley."
Other issues addressed at the event included investors seeking more portfolio transparency and the risks associated with preferential transparency for clients with higher investment levels. There is also an emerging trend toward regular monthly conference calls, where clients get updates and can ask fund managers questions.
While 70% of Canadian hedge funds have a long-short strategy, new fund launches have shown some divergence from this. But a limited number of strategies demonstrates what another manager labeled the "relative immaturity" of the Canadian industry, which, participants at the forum said, makes it an even more interesting time to be be involved.
Jonathan Ratner
Press Coverage - November 2, 2007
Financial Post Trading Desk
Opportunities abound for burgeoning Canadian hedge fund industry
From early-stage hedge funds with only a few million dollars in assets under management to some of the bigger more established names in the industry like Hillsdale and Sprott, from technology to biotech, and from small-cap to multi-strategy approaches – there were no shortage of intriguing shops to consider placing your money in if you were among the more than 50 private investors in attendance at a hedge fund conference last week.
Sixteen individual presenters, along with more than 100 other attendees, which included fund-of-funds from Canada and the U.S., as well as other hedge funds, represented a good chunk of the more than 120 hedge funds estimated to be operating in Canada and the roughly $37-billion they manage.
Risk management and how to minimize market exposure were topics that continued to come up at the second Investors Meet Canadian Hedge Fund Managers Forum, hosted by Introduction Capital’s Karen Azlen and the Hedge Fund Hotel in Toronto last week.
Some hedge fund managers said they see opportunity in the Canadian market given that it is kinder, gentler and somewhat more inefficient than its American counterpart. Some take an earnings-based approach, saying Canadian investors are primarily focused on value.
Others highlighted the difference between activist investing – pushing for management or other changes at companies they hold stakes in, and simply being active – meeting with executives, being aware of their plans and promoting certain courses of action.
Then there were those who outlined how they plan to beat the pension funds in their own game by finding opportunities before the giant money managers do.
While much of the chatter was about the soaring price of oil, some managers said they anticipate a slowdown for commodities. Others who are obviously more bullish on the sector, highlighted how they follow miners from drill bit to exploration.
And while there are still plenty of long/short funds in Canada’s still-burgeoning hedge fund industry, the event demonstrated that there are plenty of other approaches being used out there.
As one attendee put it: “Canada is the best place in the world to produce alpha.” And with the consensus pointing to continued volatility in global markets, there should be no shortage of opportunities for Canadian hedge funds.
Jonathan Ratner
Press Coverage - April 30, 2007
Financial Post Trading Desk
Hedge fund managers and investors gather in Toronto
When dozens of Canadian hedge fund managers gather as they did in downtown Toronto's Hedge Fund Hotel last Thursday, with 21 individual presentations courtesy of both interesting start-ups and established fund groups, it’s a hot ticket.
Bringing together a group of a hundred or so people – consisting primarily of Canadian hedge fund managers, some family offices, institutional investors, and their U.S. counterparts – was the work of Karen Azlen of Introduction Capital, as well as sponsors BMO Capital Markets and SGGG Fund Services Inc.
Names like Ravi Sood from Lawrence Asset Management, Gary Selke at Front Street Capital and Eric Sprott from Sprott Asset Management, were among those who detailed their strategies and various funds. This was accompanied by interesting and often amusing commentary by moderator and Allaboutalpha.com editor Chris Holt.
And people are already buzzing about the next Investor Meets Hedge Fund Manager Forum in October.
But it’s not only because of the beer, wine and cheese served after a day of short presentations from each manager – although the chatter over drinks was indeed interesting.
It’s also because this group got a chance to see and discuss how hedge funds are taking on more varied forms every day, attracting investors with a wide range of risk profiles and interests.
But this same variety is also raising some eyebrows from those who prefer the more traditional definition of a hedge fund.
The differences were clear. Some fund managers labelled themselves “stockpickers” who mostly go long, while others emphasized the fact that they focus on short-selling.
Other strategies discussed included debt-equity balancing, ETFs, capitalizing on the current M&A surge and in some cases, avoiding short selling as a result, finding opportunities that remain in the income trust sector, and foreign exchange plays. Others tried to attract interest by focusing on personnel and relationship-building with clients, or unique and rare market events, the limits on their fund’s size, activist investing, or how they capitalize on companies in restructuring or with balance sheet problems.
Regardless of their strategies, many managers wanted to stress the point that they have large amounts or all of their own money invested in the funds they manage, something you won’t likely find elsewhere.
And who doesn’t like to boast about how much their rate-of-return beat the TSX benchmark? Maybe they attracted some new investor money. Regardless, it was a networking opportunity – key in Canada’s burgeoning hedge fund industry.
Jonathan Ratner