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Shorting strategies help top fund performers


Leaders and laggards over the past year.

Navigating through the market volatility has been a true test of investment skills for fund managers. Stock markets began their collapse last fall, but some relief has come from a spectacular rally since their March lows.


We screened to find the best- and worst-performing funds for the year ended July 31. Segregated, pooled, duplicated and U.S.-dollar funds were excluded. We also left out the Horizons BetaPro leveraged exchange-traded funds (ETFs) because they would likely dominate both lists.


A mixed bag of funds with the top leaders boasting around a 47-per-cent gain, while many of the laggards turned out to be energy-focused investments.

The top two leaders outperformed, partly through shorting strategies, although only one is a hedge fund. Creststreet Alternative Energy, a $51-million mutual fund, has regulatory approval to do limited short selling, and has taken full advantage of this tool. It is currently shorting the U.S. market through ETFs.

While the fund had 80 per cent in cash at the end of 2008, that's now down to 40 per cent. "The fund's small size has allowed us to manoeuvre around the market quite freely," manager Steve Martin says.

While he believes the markets have "more legs" for a couple of months, he is cautious on the medium- to long-term prospects for economic growth and thus upside potential for stocks.

The return of the Creststreet fund was tied with Silvercreek Capital LP, a $5-million special-situations hedge fund run by Louise Morwick. From July to November, 2008, this fund focused on shorting U.S. stocks, but many of these positions were unwound to be redeployed into U.S. corporate bonds, says Bryn Joynt, chief financial officer of Silvercreek Management Inc.

"In the last four to six weeks, it's been a little bit more balanced. We still have about 50 per cent in long credit [bonds] and another 50 per cent in long-short equity exposure."

Most of the equity portion is in shorting U.S. stocks in areas like consumer discretionary and technology names, while the long positions are in areas like resource and agricultural stocks, he says.

Among the laggards, many are smaller-capitalization, energy-focused investments that are sitting in red ink because of the collapse in commodity prices. DeltaOne Strategic Energy and Claymore Natural Gas Commodity ETF, respectively, have lost 83.4 and 72 per cent.

While the price of oil plunged to about $32 (U.S.) a barrel from a peak of $147 last July, it has rebounded to around the $70 level recently. Natural gas prices, however, remain in a deep funk.


Leaders and laggards for the year ended July 31, by 1-yr return
(As of July 31/09)Latest(July 31)% returns (as of July 31, 2009)
Fund nameCategory Assets ($-mil)MERYTD % rtn1-yr3-yr5-yr10-yr15-yr
Top 15
Creststreet Alternative EnergyMiscellaneous12.647.5
Silvercreek Capital LPAlternative Strategies51.547.3
Quadrus Mac Mxm Dividend-D5Cdn Div & Incm Equity0.02.3641.041.0
Van Arbor World Advantage-FMiscellaneous39.939.2
Renaissance China PlusGreater China Equity166.53.2060.536.620.816.016.0
PH&N Absolute ReturnAlternative Strategies1.4232.135.521.616.7
Van Arbor Canadian AdvantageCdn Equity2.0086.631.510.916.4
Front Street Small Cap-ACdn Sml/Md Cap Equity2.32.5056.031.3
MBS Adjustable Rate Income IICdn Income Trust Equity31.028.5-1.8
Quadrus London Capital Cdn Div-D5Cdn Div & Incm Equity0.12.3512.425.5
Friedberg Foreign BondMiscellaneous17.50.93-
CI Global Opportunities*Alternative Strategies23.12.64-
Quadrus Mac Mxm Cdn Eq Growth-D8Cdn Focused Equity0.02.3522.622.6
CI Trident Global OpportunitiesAlternative Strategies257.62.48-0.919.537.323.1
Magna Life SettlementHigh Yield Fixed Income5.019.1
Bottom 15
DeltaOne Strategic EnergyAlternative Strategies-41.7-83.4-52.5-25.6
Lawrence PartnersAlternative Strategies1.7511.2-76.0-33.0
Claymore Natural Gas Commodity ETFMiscellaneous147.1-58.6-72.0
Creststreet ResourceNatural Resources Equity3.4417.3-68.3-28.0-11.4
Resolute PerformanceCdn Sml/Md Cap Equity334.22.9415.9-63.9-14.7
Axis Investment Funds Inc. Ser. IRetail Venture Capital3.06.78-23.0-60.6-39.7-27.6
Mavrix Canadian GrowthCdn Sml/Md Cap Equity1.63.25-5.9-59.7-29.2-14.7-20.9-10.9
Mavrix Multi Series Canadian GrowthCdn Sml/Md Cap Equity0.22.29-4.9-59.6
Sprott EnergyNatural Resources Equity86.02.8530.6-59.5-16.22.5
FrontierAlt Resource Capital Cl-ANatural Resources Equity4.738.9-56.6
Landry Morin Small Cap momentum-FCdn Sml/Md Cap Equity1.958.8-55.1-22.5-5.5
EnerVest Natural Resources Fund LtdNatural Resources Equity21.02.9516.2-54.1-25.8-6.0
Ark Aston Hill Energy ClassNatural Resources Equity6.017.7-54.1
ESI Premium PortfolioAlternative Strategies-57.9-53.5
Creststreet Energy OpportunitiesAlternative Strategies24.3-53.5-2.7
MSCI World ($ Cdn)2.1-17.0-6.6-1.3-2.83.9
S&P 500 Composite ($ Cdn)-3.7-18.0-9.6-6.2-6.13.5
S&P/TSX Composite Index20.0-20.6-
S&P/TSX Total Return22.5-17.7-
*Closed to new investors Source: Globe Investor

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