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Last year's star hedge funds hurt amid rally

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

How some Canadian hedge funds are faring in this year's wild stock-market gyrations. It was a tough 2008 for many hedgies who got clobbered in the global market carnage. Many managers ended up deep in red ink, or threw in the towel and closed shop. Only a handful made money.

TODAY'S SEARCH

We asked Victor Tan, a fund analyst with Globe Investor, to pull out the 15 worst and 15 top performing hedge funds in 2008. (These funds are in the alternative strategies category.)

We then looked at their returns for the first four months of this year. We excluded U.S. dollar, duplicate, and exchange-traded funds as well as those closed to new investors.

WHAT DID WE FIND?

A flip-flop of last year.

Most of the dogs of 2008 are in positive territory - some rebounding sharply. But many of the stars of last year are facing a tougher time.

Lawrence Partners, which lost 80.6 per cent last year, has posted a 6.1-per-cent gain. Shareholders voted in favour of a restructuring that allows manager Ravi Sood to continue running most of the fund's assets. The fund now has a heavy tilt to natural resources, and particularly towards oil.

AlphaNorth Partners, which shed 53 per cent last year, has gained nearly 33 per cent. The fund's winners included stocks like Colossus Minerals Inc., Cyberplex Inc. and Quetzal Energy Inc. The diversified small-cap hedge fund rose 21.2 per cent in April alone. "Everything seemed to be working," says manager Steven Palmer.

Salida Multi Strategy Hedge Fund, which is run by Brad White, lost 66.6 per cent in 2008, but has regained 35 per cent this year. The fund rose over 7 per cent in April with the largest returns coming from corporate bonds. Energy and base metal stocks helped offset losses in the gold sector. The fund continues to focus on commodities with a large exposure to oil and gas, gold, base metals, and uranium.

Among the star performers of 2008, Sextant Strategic Opportunities run by Otto Spork purportedly gained 172 per cent. But the former high-flying fund is now under a cease-trade order by the Ontario Securities Commission. OSC staff has also asked a court to put the fund - which is 90-per-cent invested in an Icelandic glacier company - and related parties into receivership.

Sprott Hedge LP and Sprott Bull/Bear RSP, which are run by bearish manager Eric Sprott, have lost nearly 4 per cent this year after gaining 6 per cent to 8 per cent last year. The funds, which have had shorts on sectors like financials and home builders, has been hurt in the recent market rally. But as Mr. Sprott noted in an analysts' conference call this week: "The year is young."

****

2009 Returns for Bottom Performers in 2008
Jan 1-Apr 30
(As of Apr 30)LatestMar 31YTDAnnual % returns
Fund name Assets ($-mil)MER% rtn% rtn20082007200620052004200320022001
Lawrence Partners1.753.86.1-80.620.974.7
DeltaOne Strategic Energy-35.6-40.1-76.51.3-30.5120.4-5.0
Dynamic Power Emerging Markets59.07.6019.127.2-74.340.651.7
Dynamic Power Hedge Fund-F244.010.67-7.224.8-71.838.671.573.024.9101.5
Front Street Canadian Energy25.328.831.4-67.718.256.8
Salida Multi-Strategy Hedge56.025.835.3-66.535.887.434.3
Arrow U.S. Equity Income28.721.938.0-66.2
Northern Rivers Innovation Fund LP-3.95.8-65.6-2.492.524.88.075.212.0
Webb Canadian Performance Fund-6.64.9-62.021.3
Jemekk Long/Short L.P.28.311.126.4-59.826.245.317.5
Mackenzie Alternative Strategies18.83.4326.826.2-57.42.58.14.93.98.4-2.68.1
Northern Rivers Global Energy LP-6.7-0.5-53.530.413.0
AlphaNorth Partners Fund Inc.10.69.432.7-53.3
Sprott Small Cap Hedge21.06.5216.320.1-50.9
Arrow WF Asia13.50.55.3-46.030.318.615.414.441.3-2.2
2009 Returns for Top Performers in 2008
Sextant Strategic Opportunities A171.956.5
Auspice Diversified Commodity LP-1.8-5.144.3-3.1
CI Trident Global Opportunities246.32.482.2-0.843.689.00.15.71.15.6-1.7
ESI Premium Portfolio0.0-57.7-59.842.5
IMFC Managed Futures Fund0.1-5.7-8.038.0
Man AHL Diversified (Canada) Cl-A-6.926.510.8
SciVest Net Short Equity0.52.8-4.421.5-4.62.47.1
Arrow Tetra US Long/Short12.9-0.9-3.619.60.6
SEI Futures Index-O37.40.291.2-0.315.91.8-1.32.43.55.2-2.04.2
Sprott Bull/Bear RSP A146.08.2410.4-3.68.223.224.011.522.4-4.1
Arrow Act II TMT Fund8.61.53.17.1
Sprott Hedge L.P. II-Cl A527.07.9310.9-3.76.122.922.010.623.1-7.3
SciVest Market Neutral Equity1.6-6.6-6.26.08.05.90.4-13.012.67.7
Formula Growth Hedge Fund Class A3.65.23.8-9.217.217.623.9114.6
Landry Morin long short momentum-F1.11-3.7-16.32.67.01.615.214.6
BMO Nesbitt Burns Cdn Small Cap Index 1.313.9-46.62.016.619.714.142.7-0.93.4
S&P 500 Composite -11.7-3.4-38.53.513.63.09.026.4-23.4-13.0
S&P/TSX Composite Index -3.03.8-35.07.214.521.912.524.3-14.0-13.9
S&P/TSX Venture Composite 20.026.6-71.9-4.933.622.54.263.03.6
Chart excludes funds closed to new investment.
SOURCE: GLOBE INVESTOR

© 2007 The Globe and Mail. All rights reserved.

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