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Stars and dogs of 2008 trade places

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

How the 2008 hedge fund stars and dogs fared last year.

Arguably, most funds should have done well given the strong market recovery.

TODAY'S SEARCH

We asked Victor Tan, a fund analyst at Globe Investor, to screen for the 15 best and worst performers in 2008 from the alternative strategies category. Then, we checked to see how they did in 2009, and their longer-term record.

The Horizons BetaPro bull and bear leveraged exchange-traded funds were excluded, as well as the U.S. dollar and duplicate versions of the funds.

WHAT DID WE FIND?

A lot of flip flops among the stars and dogs. Most of the 2008 hedge fund stars lost money last year, while most the 2008 dogs came back to post stellar gains.

CI Trident Global Opportunities, which garnered a stellar 43.6-per-cent gain in the 2008 market collapse, lost 3.7 per cent last year because of its continued bearish stance. Still, the fund has posted an average annual return of 38 per cent over three years, and 23 per cent over five years.

"For the last few months, we have believed that the risks to the perennially bullish, market consensus view were huge," said manager Nandu Narayanan, who is chief investment officer of New York-based Trident Investment Management.

"Unfortunately, markets have demonstrated that they can continue to go up just on momentum and hope, much as they did in 2006," he wrote in a market commentary. "The reckoning that came in 2007 and 2008 was painful, and we believe a similar cathartic adjustment is highly likely in 2010."

In stark contrast, Dynamic Power Hedge, which shed 72 per cent in 2008, came roaring back with a 189-per-cent gain in its FC version. It posted an average annual return of 3.4 per cent over three years, and 27.4 per cent over five years.

Manager Rohit Sehgal said the fund benefited from not making changes to his portfolio after a disastrous 2008. "The same stocks that were marked down came back with a vengeance," said the chief investment strategist at Goodman & Co. Investment Ltd.

Athabasca Oil Sands Corp., which will go public this year, is now 30 per cent of the fund. "I was absolutely confident that the fundamentals of the names I had were still sound," he said. He is "quite positive about the market," saying the possibility of a 2008-style market crash happening again is remote." That happens once in a blue moon or in a 100 years."

It will be interesting to see who has the crystal ball.

Top alternative strategy funds ranked by 2008 performance
Assets)
($mils)Latest(Calendar Year Returns)(As of Dec. 31, 2009)
NameDec./09MER20082009200720063YR5YRInception
Auspice Diversified Commodity44.3%-7.9%-3.1%8.8%4.1%
CI Trident Global Opportunities253.12.8743.6%-3.7%89.0%0.1%37.8%22.6%13.5%
IMFC Managed Futures Fund0.038.0%-10.6%11.1%
Silvercreek Capital LP6.128.1%73.0%59.1%
Fiera Global Macro Class A68.723.9%-3.5%15.2%11.3%11.0%
Arrow Tetra US Long/Short9.419.6%-6.9%0.6%3.9%3.9%
SEI Futures Index-O36.40.2615.9%-1.1%1.8%-1.3%5.3%3.3%3.1%
Fiera N.A. Market Neutral II219.210.0%26.8%21.6%
Sprott Bull/Bear RSP A140.03.548.2%0.3%23.2%24.0%10.2%13.1%12.3%
Folk Strategic Investment2.047.2%-0.1%3.3%
Arrow Act II TMT Fund7.27.1%2.3%4.6%
Sprott Hedge L.P. II-Cl A527.03.096.1%-0.6%22.9%22.0%9.0%11.8%9.0%
SciVest Market Neutral Equity1.66.0%-1.9%8.0%5.9%3.9%3.6%4.5%
Polar Securities Altairis Lg/Sht-A2.905.8%19.4%10.6%15.4%11.8%12.7%23.2%
Formula Growth Hedge Fund 3.8%16.8%-9.2%17.2%3.3%8.7%22.3%
Bottom alternative strategy funds ranked by 2008 performance
Lawrence Partners1.75-80.6%8.9%20.9%74.7%-36.5%-13.8%
DeltaOne Strategic Energy-76.5%21.1%1.3%-30.5%-34.0%-15.1%-6.0%
Dynamic Power Emerging Mkts78.33.61-74.3%62.8%40.6%51.7%-16.2%0.0%
Dynamic Power Hedge Fund-FC*357.9-71.8%189.1%38.6%71.5%4.2%27.4%33.9%
Front Street Canadian Energy38.3-67.7%166.0%18.2%56.8%0.6%19.2%
Salida Multi-Strategy Hedge107.8-66.5%181.6%35.8%87.4%8.6%26.4%30.3%
Arrow U.S. Equity Income28.3-66.2%65.3%-18.3%
Northern Rivers Innovation Fund37.2-65.6%8.0%-2.4%92.5%-28.7%-2.7%8.7%
Jemekk Long/Short L.P.63.8-59.8%76.8%26.2%45.3%-3.5%8.9%11.0%
Dynamic Contrarian-F2.03-58.6%100.3%1.7%52.2%-5.5%10.5%
Mackenzie Alternative Strategies1.93.43-57.4%-69.9%2.5%8.1%-49.1%-31.6%-17.5%
Northern Rivers Global Energy LP4.8-53.5%37.7%30.4%13.0%-5.8%0.7%
AlphaNorth Partners Fund Inc.24.0-53.3%160.6%13.6%
Sprott Small Cap Hedge31.02.48-50.9%78.0%2.4%
Arrow WF Asia13.2-46.0%31.9%30.3%18.6%-2.4%4.9%10.6%
MSCI World ($ Cdn)-26.1%11.8%-7.1%20.6%-8.4%-0.3%
S&P 500 Composite ($ Cdn)-23.8%5.5%-12.2%13.6%-11.0%-4.4%
S&P/TSX Composite Index-35.0%30.7%7.2%14.5%-3.1%4.9%
* Dynamic Power Hedge reported a gain of 159 per cent in 2009 in the A version for new investors in the fund after Jan. 1, 2009.
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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