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A brutal year for resource-focused funds

swon@globeandmail.com

What are we looking for?

The biggest fund losers over the past year: Let's look at funds that have struggled the most amid uncertainties arising from the euro-zone debt crisis, the slowing Chinese economy and a tepid U.S. recovery.

The screen

We examined the worst performers among active managers in all asset categories for the year ended March 31. U.S. dollar, segregated and duplicate versions of the funds were excluded, as well as exchange-traded funds.

What did we find?

Mostly resource-focused funds, led by Salida Strategic Growth taking a 59-per-cent haircut.

The hedge fund, now heavy weighted in gold and energy names, is not for the faint of heart. The loss is reminiscent of calendar 2008 when it shed 67 per cent under its former name, Salida Multi-Strategy Hedge Fund. Its small-cap resource stocks took a beating as investor fled risky assets during the credit crisis.

Danny Guy, chief investment officer of Salida Capital Corp., took over the fund two years ago from Brad White who left to join Avenir Capital Corp. There is no hint in the fund's name that indicates a resource bent, but this long-time concentration stems largely from a belief that the growing emerging markets need commodities to fuel their growth.

Salida will not divulge the assets in any funds or specific holdings. However, it looks like Salida Strategic Growth is pinning lots of hope on gold stocks, which have lagged the rising bullion price. "We believe that future [U.S.] economic data is likely to turn less rosy in the coming months," Mr. Guy said in a March commentary.

"Any meaningful weakness will be met with some form of [quantitative easing]," he suggested, referring to the U.S. Federal Reserve Board's bond-purchase program to stimulate the economy.

"The obvious beneficiary of more Fed money-printing is gold," he said. "Gold stocks have now returned to levels last seen two years ago when gold was at $400 (U.S.) an ounce. ... Any rebound in bullion could see a dramatic jump in the stocks driven by short-covering and panic buying by underweight investors."

With Salida Strategic Growth suffering a 6.8-per-cent annualized loss over five years now, new investors will have to put a lot of faith in the manager's outlook.

*****

BIGGEST ONE-YEAR FUND LOSERS TO MARCH 31, 2012

Assetsto March 31, 2012Calendar year returns
FundCategoryMER(in $ mil.)1 year 3 years5 years2011201020092008
Salida Strategic GrowthAlternative Strategiesn/an/a -59.31%13.26%-6.75% -53.39%44.88%181.55%-66.50%
Pathway Energy Series A Reg.Alternative Strategiesn/an/a-55.03%1.23%-41.62%-55.26%10.20%108.70%-78.87%
Pathway Explorer Ser. A Reg.Alternative Strategiesn/an/a-47.94%-9.34%-18.99%-50.07%34.07%39.69%-71.59%
Front Street Canadian EnergyAlternative Strategiesn/a27.0-46.18%20.07%-5.75%-38.78%48.05%166.03%-67.67%
Sevenoaks RedwoodAlternative Strategiesn/an/a-44.24%
PwrSh Gl Clean Energy Cl AMisc. - Sector Equity2.041.3-43.03%-41.34%-18.57%
Webb Enhanced GrowthGlob. Small/MidCap Eq.6.69n/a-42.84%-2.68%-47.18%13.94%52.95%
Qwest Energy Cdn. Res. Cl ANatural Res. Equity4.0922.5-42.56%3.55%-12.49%-42.00%22.54%15.28%-40.37%
FrontierAlt Res. Capital Cl-ANatural Res. Equityn/a2.2-40.79%3.05%-46.38%25.50%70.82%-72.70%
Matrix Canadian ResourceNatural Res. Equity3.043.1-40.15%16.80%-4.61%-40.58%37.40%198.06%-67.09%
Terra Res. ETF Fund-Class RNatural Res. Equityn/an/a-38.21%-35.45%
Dynamic ContrarianAlternative Strategies4.2946.4-37.68%12.75%-8.29%-40.84%35.00%98.35%-59.13%
Redwood Ark Energy ClassNatural Res. Equity5.23n/a-35.21%19.83%-21.81%26.79%74.10%
Front Street Small Cap CC-AMiscellaneous - Other6.3314.5-33.09%22.61%-27.86%42.47%111.78%16.28%
Terra Small Cap Resource-RNatural Res. Equityn/an/a-32.52%15.30%-4.75%-29.65%54.08%32.02%-47.25%
S&P/TSX Total Return-9.76%15.59%1.66%-8.71%17.61%35.06%-33.00%
S&P 500 Composite Total Return Index ($Cdn)11.59%14.23%-0.87%4.42%9.35%8.08%-21.92%
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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