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Assessing the best Alternatives

WHAT ARE WE LOOKING FOR?

Eye-popping one-year returns.

Investors might be tempted by hedge funds, or funds using "alternative strategies" ranging from short selling to leverage and derivatives, to produce returns that don't correlate with the broader markets.

Those funds typically require a minimum investment of $25,000 to $150,000, and charge performance fees in addition to management fees.

TODAY'S SEARCH

Today we look at the alternative strategy funds with the highest one-year return over any period within the five years ended Sept. 30.

We then check to see how they have performed over one, three, five and 10 years. We exclude U.S.-dollar-denominated funds. We do, however, include the F-version of the funds targeted to clients of fee-based advisers. They do have a higher return than the A-version because of slightly lower fees.

SO WHAT DO WE TURN UP?

Hot short-term performance is no guarantee of strong long-term gains. In fact, some of the funds with the best one-year numbers have ended up being major dogs.

The DeltaOne Energy Fund LP posted the best one-year return - a spectacular 178.5 per cent for the year ended Sept. 30, 2005. Over the past five years, it has been a big loser with an annualized loss of 22 per cent.

The newer DeltaOne Strategy Energy, which posted an impressive one-year return of 139.1 per cent for the year ended Oct. 31, 2005, has fared somewhat better with a three-year annualized return of 20.5 per cent.

AGF Managed Futures Fund, which offers exposure to commodity markets through the use of derivatives, posted the second best one-year return - 177.1 per cent for the year ended Jan. 31, 2003. Over the past 10 years, however, it lost an annualized 21.7 per cent. Understandably, that fund is being shut down next week.

But there are gems.

Dynamic Power Hedge Fund-A run by Rohit Sehgal garnered the third-best one-year return - 157.6 per cent for the year ended April 30, 2006. The F-version of the fund, which has been around longer, was the top performer with a five-year compounded annual return of 61.8 per cent.

swon@globeandmail.com

Top 20 Alternative Strategy funds with highest 1 year return within the past 5 years

BestEffective As of Sept. 30, 2007
Assets1-yeardate of 1-year3-year5-year10-year
Fund name(000s)% returnbest 1-yr rtn% return% return% return% return
DeltaOne Energy Fund LP178.530-Sep-2005-72.4-44.0-22.0
AGF Managed Futures4,855177.131-Jan-2003-38.8-29.3-14.8-21.7
Dynamic Power Hedge Fund - A142,283157.630-Apr-200687.8
Dynamic Power Hedge Fund - F411,859153.030-Apr-200685.368.561.8
DeltaOne Strategic Energy139.131-Oct-2005-5.020.5
King & Victoria Fund LP114.829-Feb-20045.14.426.5
Sextant Strategic Opportunities F110.531-Jan-200738.2
Horizons Northern Rivers Fund LP102.331-Dec-200637.733.7
Salida Multi-Strategy Hedge194,00099.931-May-200659.7
Sextant Strategic Opportunities A99.031-Jan-200746.8
Northern Rivers Innovation Fund LP99,21794.531-Mar-200435.435.034.9
Northern Rivers Innovation RSP14,82093.931-Dec-200639.033.0
Lawrence Partners84.131-Aug-200639.5
Mountainview Cdn Opportunistic83.830-Nov-200320.815.3
Epic Limited Partnership138,90082.229-Feb-200418.523.429.6
Arrow Epic Capital93,11681.129-Feb-200423.328.030.8
HBP Crude Oil Bear Plus-A1,85378.131-Jan-2007-36.4
Dynamic Contrarian221,56974.631-Oct-200617.0
Arrow Distressed Securities63,49373.831-Dec-200430.120.2
Peregrine Investment Mgmt Fund L.P.27,63670.130-Apr-200649.441.3

SOURCE: GLOBEFUND

© 2007 The Globe and Mail. All rights reserved.

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