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Gluskin Sheff legacy broadens with Dunkley exit

A new money management firm is in the works, as veteran fund manager Brad Dunkley prepares to leave Gluskin Sheff + Associates.

While co-founder Ira Gluskin and strategist David Rosenberg garner many of the headlines at Toronto-based Gluskin Sheff, on the Street, there's enormous respect for Mr. Dunkley's prowess. Mr. Gluskin, to his credit, routinely praises his colleague's ideas in the musings he sends to clients.

Gluskin Sheff has $5.3-billion under management, and Mr. Dunkley's responsibilities as a portfolio manager include running hedge funds at the firm. Mr. Dunkley is leaving on relatively friendly terms: News that he is departing was released earlier this week, but the portfolio manager is expected to be around until the end of the month. This spring, Mr. Dunkley is expected to launch his new firm with colleagues that include veterans of bank-owned dealers.

There's a long, proven pattern of one successful money management firm giving birth to another, as one generation of entrepreneurs shows the next how to build a business. Alumni of Gluskin Sheff are part of this trend as they include Kiki Delaney and Nancy MacKellar, now the president and executive vice-president, respectively, of successful money manager C.A. Delaney Capital Management.

The senior partners in Gluskin Sheff - along with Mr. Gluskin, it was co-founded in 1984 by former architect Gerald Sheff - have put together a case study in creating wealth by managing money for others. The pair first built a firm that generated lucrative performance fees during good years, then capitalized on this success by taking the company public in 2006, in the midst of a bull market.

Along with Mr. Dunkley's departure, Gluskin Sheff announced yesterday that it hired former Phillips Hager & North co-president Patrick Keeley.

In looking at these comings and goings, analyst Phil Hardie at Scotia Capital said yesterday in a report: "While the addition of Mr. Keeley is likely another big win that will further strengthen the firm's client service capabilities, Mr. Dunkley's departure comes as a disappointing surprise to us. With that said, we believe that Gluskin Sheff's investment team is deep in talent and experience."

Hedge funds bounce back

Canada's hedge funds put up one of their best years ever in 2009, on the heels of one of the worst periods in the fledgling sector's history.

Domestic hedge fund managers finished 2009 up 28.62 per cent on an asset-weighted basis, and up 26.31 per cent on an equal-weighted basis, according to number-crunching done to build the Scotia Capital Canadian hedge fund performance index, which was released late Tuesday.

The index "significantly outperformed broader hedge fund indices on the year," said Scotia Capital, and this was the best performance seen during the six years that the investment dealer has tracked the sector. "The year was characterized by an overall return of investor risk appetite, as central banks' efforts to stimulate economic growth resulted in economic stabilization, and market participants ultimately refocused on higher risk securities as interest rates were kept low," said Scotia Capital.

In 2008, a year to lament in capital markets, domestic hedge funds were down 15.9 per cent on an asset-weighted basis, and dropped a terrifying 22.6 per cent on an equal-weighted basis. For an asset class that's designed to perform in good markets and bad, these are disgraceful results.

It's worth noting the difference in results, with the asset-weighted index consistently showing better returns than the equal-weighted benchmark - indicating that the managers of Canada's larger hedge funds outperformed smaller rivals in both the down market of 2008 and last year's rally.

Domestic hedge funds did not keep pace with the Canadian equity benchmark in 2009, as surging commodity markets helped the S&P/TSX composite to a 30.7-per-cent gain.

See Andrew Willis's Streetwise Blog at

© 2007 The Globe and Mail. All rights reserved.

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