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Canadian hedge funds back from the abyss

swon@globeandmail.com

what are we looking for?

The alpha dogs among Canadian hedge funds this year.

While most were also losers in 2008 amid a market crash, let's see if they managed to make money over the tumultuous 12 months ended in September.

today's search

We screened for the top 30 best-performing funds in the alternative strategies group for the first nine months of this year, and how they fared over the year ended Sept. 30.

Horizons BetaPro's bull and bear exchange-traded funds, U.S. dollar and duplicate versions were excluded. (Funds without a 2008 return and which did not file September results to Globe Investor in time are not included.)

what did we find?

Some have returned from the abyss over one year.

Among those in the red last year, AlphaNorth Partners Fund has returned a stellar 139 per cent so far this year. It's also in positive territory over the 12 months ended Sept. 30 with a 56-per-cent gain.

What makes this feat more significant to investors is that the fund can't reset its high-water mark annually like some competitors, says manager Steven Palmer. "So I started earning performance fees again once I made everybody's money back from the high-water mark of 2007."

Recent winners in his smaller-company hedge fund included Colossus Minerals Inc., a miner focused on Brazilian gold, and

AusPotash Corp., a private firm acquired by Sirius Exploration.

Salida Multi-Strategy Hedge, which shed 67 per cent last year, has gained 46 per cent over one year. Front Street Canadian Energy, which lost nearly 68 per cent in 2008, is up 38 per cent over one year.

This year's gains in the Front Street fund run by Normand Lamarche also stems from changing the focus from last year when it was known as Front Street Mining Opportunities. "The fund will overweight energy as we move through the cycle here," says Chris Fontana, director of sales at Front Street Capital Corp. "Norm sees better opportunity in the energy space than the base metals space."

Some, including Webb Canadian Performance Fund, are still under water over one year despite a 30-per-cent gain in the first nine months of this year. The fund shed nearly 27 per cent for the year ended Sept. 30.

Manager Derek Webb says he expects to bow out of the hedge fund space. There are plans to merge the hedge fund into his mutual fund, Webb Enhanced Growth. It's not surprising given that the mutual fund has gained nearly 57 per cent in the first nine months, and is up 17 per cent over the year ended Sept. 30. These returns will be an easier sell to investors.

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How alternative strategy funds have fared this year
(As of Sep 30)Latest(Sep 30)% rtn% returns (as of Sep 30)
Fund name Assets ($-mil)MERYTD % rtn20081-yr3-yr5-yr10-yr
Salida Multi-Strategy Hedge94.7145.4-66.545.710.7
AlphaNorth Partners Fund Inc.138.7-53.355.8
Dynamic Power Hedge Fund-F515.910.67137.2-71.8-1.09.627.7
Front Street Canadian Energy44.6130.2-67.738.21.8
Silvercreek Capital LP5.074.728.162.1
Dynamic Power Emerging Markets80.77.6074.2-74.3-7.2-7.1
Dynamic Contrarian109.62.4967.2-59.1-7.2-8.8
Vertex Fund-A273.84.3865.2-40.332.56.711.217.6
Creststreet Energy Opportunities64.5-42.8-21.411.6
Arrow U.S. Equity Income29.363.7-66.2-2.9
Arrow Enso Global28.159.6-44.119.92.65.6
King & Victoria Fund LP54.6-24.531.77.25.9
Sprott Small Cap Hedge26.02.4852.2-50.9-0.1
Mackenzie Alternative Strategies12.93.4342.5-57.4-33.7-13.4-6.2
PH&N Absolute Return147.81.4241.61.548.021.818.3
Primevestfund39.5-35.99.516.2
Front Street Canadian Hedge Sr B1133.439.4-40.310.00.95.7
Barometer Long Short Equity36.2-20.321.9
Goodwood Fund-A31.22.4931.0-45.36.3-10.13.610.4
Palos Income Fund LP30.2-31.7-1.0-0.75.5
Arrow Goodwood37.429.6-45.65.0-10.83.9
Webb Canadian Performance Fund29.5-62.0-26.5-14.6
Arrow WF Asia14.329.1-46.03.82.06.7
Global Portfolio Solution LP Cl-F28.2-38.1-5.5
Fiera N.A. Market Neutral II27.410.032.2
Palos Capital Pool LP27.0-24.312.22.0
Northern Rivers Innovation RSP5.526.6-64.6-28.3-13.51.9
Northern Rivers Global Energy LP4.323.9-53.5-21.3-6.0
Palos Equity Income RRSP22.6-23.6-1.7
Dynamic Income Opportunities-F4.2821.1-25.33.54.9
MSCI World ($ Cdn)9.9-26.1-0.5-5.10.7-1.8
S&P 500 Composite ($ Cdn)2.5-23.8-8.3-8.7-4.3-5.0
S&P/TSX Composite Index26.8-35.0-3.0-1.05.65.1
S&P/TSX Total Return30.0-33.00.51.98.37.3
S&P/TSX Venture Composite60.2-71.9-9.7-19.8-4.8
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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