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Funds that delivered a hair-raising ride

What are we looking for?

The biggest losers among Canadian hedge funds this year.

Given that managers of these funds have many tools to fend off volatile stock markets, let's see what strategies have suffered most.

The screen

We ranked the 15 worst returns for the first nine months of 2011 in the alternative strategies category. U.S. dollar, and duplicate versions of the funds were excluded.

What did we find?

Funds with big resource bets taking huge hits.

Enso Global, a small-cap global resource fund run by New York-based Enso Capital Management Inc., shed nearly 60 per cent as commodity stocks got spanked.

"It's similar to 2008 when things sold off indiscriminately," said Mark Purdy, managing director of Arrow Capital Management Inc. "[Enso] went down by 44 per cent in 2008, and recovered very well in 2009 [up 77 per cent] - back over the high-water mark, and had a strong 2010."

While the Enso name may not be well known here, the firm was founded by Joshua Fink, son of Lawrence Fink, chief executive officer of giant asset manager BlackRock Inc. Enso remains "very optimistic about the growth prospects of the fund" because it feels the fundamentals of the companies it owns are strong, Mr. Purdy said.

Salida Strategic Growth, run by Salida Capital Corp., was another big loser with a 49-per-cent haircut. This resource-heavy fund was formerly known as Strategic Multi-Strategy Hedge. It was dragged through the mud in 2008 after losing 66 per cent, but bounced back with a whopping 182-per-cent gain the next year.

Even a fund that did well in 2008 by only losing 2.5 per cent made the list of underperformers. Redwood Absolute Return (formerly Redwood Long/Short Conservative Equity) shed almost 22 per cent after a manager change in late 2010. Last month, a new firm, Red Sky Capital Management Inc., which is 35 per cent owned by CI Financial Corp., was hired to turn that fund around.

The lesson from the big losses is that hedge funds don't always hedge a lot. While funds could bounce back big time as some did in 2008, investors have to be comfortable with hair-raising, roller-coaster rides.



Latest assetsYTD % rtn1-mo. % rtn1-mo. % rtn1-mo. % rtnCalendar year % rtn
Fund name($-mil)(Sep. 30)(Sep. 30)(Aug. 31)(July 31)20102009200820072006
Enso Global24.6-59.5-33.5-16.52.895.176.8-44.112.513.3
Salida Strategic Growthn/a-49.4-37.2-16.55.744.9181.6-66.535.887.4
Front Street Canadian Energy29.6-41.1-21.3-15.310.548.1166.0-67.718.256.8
Dynamic Power Hedge Fund-FCn/a-40.6-15.6-
Dynamic Contrarian72.4-39.9-13.7-17.2-1.735.098.3-59.10.650.4
Sevenoaks Opportunitiesn/a-36.4-17.8-8.7n/a6.58.6-35.018.0-8.2
Salida Global Energy - Class An/a-32.5-24.3-10.25.324.9n/an/an/an/a
Dynamic Power Emerging Markets27.3-31.6-13.3-
Front Street Canadian Hedge Sr B116.0-25.1-11.7-9.91.725.237.7-40.39.819.0
Goodwood Fund-A20.8-23.5-7.8-8.1-
Goodwood Value28.4-23.3-8.0-8.1-1.10.444.7-45.6-3.79.9
Lightwater Cons Long/Short An/a-23.2-4.9-
Redwood Absolute Returnn/a-21.7-3.0-
360 Global6.3-20.6-0.7-18.0-1.2-1.1n/an/an/an/a
S&P 500 Composite Total Return Idx($Cdn)-4.5-1.0-3.2-
S&P/TSX Total Return-11.9-8.7-1.2-2.517.635.1-33.09.817.3
Source: Globe Investor, Bloomberg

© 2007 The Globe and Mail. All rights reserved.

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