The Strengthening of
Canada’s Funds Markets
by Iain McMurdo
Hold ‘Em or Fold ‘Em? - Basel II
by Alex Jurshevski and Irina Park
The Merits of Taking a Portfolio Approach in
Hedge Fund Investing
by Peter Klein
Hedge Funds 2006: The End of the Beginning
by Canadian Hedge Watch Staff
A Commentary on the Dialogue with the OSC
by Basil D’Souza
3
The Strengthening of Canada’s Funds Markets
by Iain McMurdo, Walkers
7
Hold ‘Em or Fold ‘Em? - Basel II, Higher Risk
Assets, and Portfolio Choices
by Alex Jurshevski and Irina Park, Recovery Partners
Performance Summary
Dec
2006
CHW HEDGE FUND INDICES (CHW-HF)
CHW-HF Composite Index
9
The Merits of Taking a Portfolio Approach in
Hedge Fund Investing
CHW-HF Equity Hedged Index
by Peter Klein, KCS Fund Strategies Inc.
CHW-HF Fund of Funds Index
12
Hedge Fund Performance Tables
19
Hedge Funds 2006: The End of the Beginning
by Canadian Hedge Watch Staff
24
Hedge Fund Snapshot: Picton Mahoney Long
Short Equity Fund Class A
25
A Commentary on the Dialogue with the OSC
by Basil D’Souza, Quadrexx Asset Management Inc.
27
Around the Hedge
A Review of Hedge Fund Happenings
Comprehensive
updates on
Canadian Hedge
Funds
ANNUAL
SUBSCRIPTION
December, 2006
(including December, 2006 Report):
$695 CAD
plus GST.
Canadian Hedge Watch Inc.
Tel: (416) 848-0277
Tel: (877) 249-9249
Fax: (416)848-0278
www.canadianhedgewatch.com
research@canadianhedgewatch.com
Contact Wilson Tseng at 416.848.0277 or
tseng@canadianhedgewatch.com
2
CHW-HF Notes Index
YTD
%
2.97
1.54
12.23
4.54
2.28
17.95
0.76
0.27
1.53
-0.26
1.38
1.24
Scotia Capital Canadian Hedge Fund Index
SC CDN HF Index Asset Weighted
4.53
1.70
17.57
SC CDN HF Index Equal Weighted
4.12
1.79
17.36
CSFB/Tremont Hedge Indices
CSFB/Tremont Hedge Fund Index
%
1.83
2.07
13.86
Convertible Arbitrage
1.49
1.06
14.30
Dedicated Short Bias
0.63
-5.46
-6.61
Emerging Markets
2.84
3.15
20.49
Equity Market Neutral
0.88
0.97
11.15
Event Driven
1.58
2.09
15.73
Distressed
1.68
1.59
15.58
Event Driven Multi-Strategy
1.59
2.39
16.38
0.49
3.01
8.15
Fixed Income Arbitrage
Risk Arbitrage
0.72
1.16
8.66
Global Macro
1.36
1.44
13.53
Long/Short Equity
2.08
2.60
14.38
Managed Futures
4.05
2.22
8.05
Multi-Strategy
1.77
2.26
14.54
GLOBAL HEDGE FUND INDICES
CHW Quarterly
Canadian Hedge Fund
Report
Nov
2006
%
Hennessee Hedge Fund Index
1.28
1.74
11.36
HFRI Fund Weighted Composite Index
1.48
2.10
12.93
HFRI Equity Market Neutral Index
0.86
0.45
7.35
HFRI Fund of Funds Composite Index
1.78
1.87
10.43
MARKET INDICES
%
MSCI World Index (C$)
4.13
4.24
20.90
MSCI World Index (US$)
2.06
2.50
20.65
MSCI Emerg. Markets Free Index (C$)
6.63
9.28
32.86
Dow Jones 30 Industrial Avg. (US$)
1.97
1.17
16.29
NASDAQ Composite Index (C$)
1.34
4.50
9.75
NASDAQ Composite Index (US$)
-0.68
2.75
9.52
S&P 500 Total Return Index (C$)
3.46
3.63
16.03
S&P 500 Total Return Index (US$)
1.40
1.90
15.80
S&P/TSX Comp. Index
1.50
3.52
17.26
www. c a n a dia n hedgewat ch.com
The Strengthening of Canada’s Funds Markets
by Iain McMurdo, Walkers
"
M
ore” was a word commonly used to sum up
market activity in 2006. Global markets saw
more hedge funds and private equity funds
involved in takeovers and buyouts, more varied use of
alternative investment vehicles, and more investment
activity in emerging markets last year.
One of the biggest market drivers was the increase in
buyouts of public companies by private equity firms and
bigger deals overall. As of December 2006, the value of
private equity buyouts in the United States and Canada
was on pace to almost triple, with U.S. deals approaching
US$370 billion for the year and Canadian deals climbing
to US$10.1 billion. In the UK, companies had announced
US$75 billion of takeovers in the first 11 months of 2006,
compared with US$34 billion in 2005. Globally, 2,262
private equity deals worth US$563.2 billion had been
struck by December 2006. In 2005, the total private equity
deals were worth US$350.1 billion.
Takeover targets represented a wide range of industries
and included brand names such as HCA Inc., Equity Office
Properties Trust, Home Depot, T-Mobile, the London
Stock Exchange Group, Dunkin' Donuts, Clear Channel
Communications, SunGard Data Systems, Neiman
Marcus, and Metro-Goldwyn-Mayer.
Some of Canada's best-known publicly-traded property
companies, such as Intrawest Corp. and Fairmont Hotels &
Resorts Inc., also got wrapped up into this trend. Fortress
Investment Group LLC paid $2.8 billion for Intrawest, while
Colony Capital LLC and Saudi Prince al-Waleed bin Talal
bought Fairmont in a deal worth US$3.3 billion.
There are several contributing factors to the growth in
number and size of these private equity deals. Some public
companies are trying to avoid the burden of SarbanesOxley regulations in the U.S. by going private. In addition,
private equity funds have billions of dollars to invest, which
is fueling the takeover activity worldwide.
For a third consecutive year, pension funds continued
to drive investments into hedge funds. This trend was
supported by companies such as Unilever, whose pension
funds in 42 countries will soon be able to invest into funds
of hedge funds. Traditional hedge fund investors including
New Jersey's state pension funds and the Indiana State
Teachers' Retirement Fund, upped their investments.
New Jersey increased its commitment to hedge fund
investment from US$800 million in 2006 to US$4.6 billion
in 2007. Even emerging markets got in on the activity.
China's state pension fund is preparing to make its first
investments abroad, putting up to US$1 billion into foreign
financial markets in an effort to improve returns on its
reserves.
The pension fund twist in 2006 was that private equity
investments were also being added to the mix. For
example, the governing agency for the San Diego City
Employee Pension Fund is weighing investment in private
equity funds for the first time. David Gamble, former head
of British Airways Pension Investment Management, one
of the UK's largest company pension plans, supported
investments in private equity as part of a diversified
portfolio. Britain's biggest pension fund, BT, is reportedly
switching about a third of its UK equity holdings – some
3 billion pounds – into hedge funds and private equity as
well.
Continued on page 4
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Continued from page 3
Interest and investment by pension funds in hedge funds
is likely to continue in 2007 following the 2006 mid-year
amendments to the US Pension Protection Act. These
amendments have reduced the number of hedge funds
that need to operate in compliance with ERISA and eased
the compliance burden for hedge funds that manage the
'plan assets' of ERISA investors.
In the Cayman Islands, changes to the jurisdiction’s
Mutual Funds Law were enacted to improve certain
aspects of doing business in Cayman for outside
investors, including the introduction of innovative and
market-leading electronic audit and electronic reporting
procedures. Similarly, in the British Virgin Islands, the
segregated portfolio company (SPC) regulations were
enacted, thereby allowing the incorporation of SPCs for
Both the enormous amount of activity in the private equity
markets and the claim that the line between private equity
and hedge funds continues to blur, have encouraged
pension funds around the world to leverage alternative
investments as an influential part of their investment
strategies.
As is to be expected in financial markets, regulation was
also a big topic in 2006. While the Securities and Exchange
Commission (SEC)’s New Rule 203 was reversed earlier
in the year, the Commission continues to look for ways to
protect investors including the introduction of measures
to prohibit fraud by investment advisers and the raising of
the net-worth standard for investing in hedge funds. The
UK’s Financial Services Authority (FSA) is also looking
for ways to increase transparency and change access to
some types of funds.
mutual fund and insurance companies in the British Virgin
Islands. Further amendments were also made to the
recently enacted BVI Business Companies Act to fuel the
jurisdiction’s growth as an offshore financial center.
Canadians have started the new year with their own new
hedge fund regulations. Some experts blame scandals
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such as the U.S. SEC’s recent anti-fraud charges against
Joseph Speigel who allegedly shorted securities through a
Canadian broker-dealer, and the 2005 collapse of Montrealbased Norshield Asset Management (Canada) Ltd. and
Toronto-based Portus Alternative Asset Management Inc.,
as the driving forces behind the changes.
Under the new regulations, which were announced by
the Canadian Securities Associations (CSA) in January,
hedge funds managers will be required to register with
provincial securities commissions. Currently individuals
who manage a specific investment portfolio are required
to register. The new rules will also require registration by
executives who set up and operate the fund management
companies. These executives will further be required to
meet standards regarding competence, financial backing,
integrity, and the ability to manage conflicts of interest.
The CSA is also considering introducing new regulatory
oversight for protected notes and new regulations for
referral rules.
NBCN Prime Brokerage, the prime brokerage arm of
Canadian investment bank, National Bank Financial,
released a survey in January that polled 35 Canadian
fund managers. It found that all of the hedge funds were
already registered. These findings suggest the new
regulations may not be too much of a change. Certainly
any growing market will need to work through challenges
as it matures.
The relatively young age of the Canadian market was
shown in the NBCN Prime Brokerage survey, which
reported that only 17% of the hedge funds polled have
been around for more than ten years.
It seems however, that what the market lacks in age
it makes up for in drive. Between 2005 and 2006, the
number of Canadian hedge funds grew by 25% to nearly
200. While that rate of growth is impressive, even more
noteworthy is the fact that during the same time period
assets under management grew 40%. Nearly 30% of the
Canadian funds in the survey reported assets between
$10 million and $50 million.
Despite the 40% growth, the assets under management
figures are still relatively small in comparison to funds
launched by U.S. fund managers, which typically start
with a minimum of $50 million for offshore funds and
can range into billions of dollars. It’s undeniable though,
that Canadian fund managers are moving in the right
direction.
The Canadian funds market has something to offer that
the markets in the U.S. and Western Europe are lacking.
The country’s rich natural resources – from lumber and
mineral ore to oil and gas – offer a vast array of commodity
investments for fund managers. According to the NBCN
Prime Brokerage study, more than half of the Canadianbased hedge funds leverage strategies for futures and
commodities.
Another change that will impact the Canadian market
is the Canadian government’s decision, announced in
October 2006, to tighten restrictions on companies which
want to convert to lightly-taxed income trusts. This change
Continued on page 6
Mark Your Calendar!
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will take place
November 5-7, 2007
in downtown Montreal at the Hilton Montreal Bonaventure,
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For early bird sponsorship opportunities please contact
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w ww.ca nadi an h edgew a t c h .c om
5
Continued from page 5
may also bode well for the funds market. Previously, the
income trust structure allowed companies to make large
payouts, sometimes the full sum, of their operating income
to shareholders. Unit holders benefited from high dividend
yields, but the federal government and the provinces,
according to government sources, lost out on sizeable
tax revenues. Under the revised rules, trusts will pay a
distribution tax set at the conventional corporate tax rate.
There is a four-year grace period during which existing
trusts can unwind. We can expect increased opportunities
for private equity houses looking to take over these trusts,
or a flurry of merger activities as the compliance deadline
approaches.
With all of these factors in place, we predict that the
Canadian hedge fund industry will continue to grow at
a rapid rate over the next five to ten years as the fund
managers form offshore funds to attract non-Canadian
investors to their domestic and international strategies.
Additional regulation will assist in the marketing campaigns
of these investment managers seeking to capitalize on the
attention that the Canadian economy is garnering.
As the CSA and other government agencies continue to
refine Canada’s regulatory environment, it is important
for investors and fund managers to keep an open mind
about what these changes can bring and understand that
legislation that will protect investors and help the industry is
good for everyone. As more private investors and pension
funds begin to look to hedge funds as an investment
vehicle, regulators are trying to create legislation that
takes into account the long-term security of investors of
all sizes.
With Walkers’ strong presence in the Cayman Islands, a
jurisdiction that has long-offered a solid base of lawyers,
accountants and fund administrators, and strict regulations
for investors and managers, we see great opportunities for
Canada with these new regulations.
As the global funds market continues to grow, and
investors look for new places for their money, being able
to add Canada as a viable jurisdiction for international
investments will help fuel the industry, not only in Canada,
but around the world from Cayman to Jersey to BVI and
beyond.
Iain McMurdo is an Investment Funds partner
with Walkers, a leading global offshore law firm
with offices in the Cayman Islands, BVI, Dubai,
Jersey, Hong Kong, London, and Tokyo.
For more information, visit www.walkersglobal.com.
Want to reach high-level hedge fund retail and institutional
executives, investors and brokers?
Advertise with Canadian Hedge Watch.
For information about advertising opportunities please contact
Tony Sanfelice at 416.848.0277 or
sanfelice@canadianhedgewatch.com.
6
www. c a n a dia n hedgewat ch.com
Hold ‘Em or Fold ‘Em? - Basel II, Higher Risk
Assets, and Portfolio Choices
by Alex Jurshevski and Irina Park, Recovery Partners Limited
Summary
Basel II is going to make holding distressed/non-performing
assets much more costly to maintain on the balance sheet
than in the past.
In previous credit down cycles, banks would automatically
send all of their distressed loans to their Special Loans
Groups to be worked out. Under the new Basel II
captain management regime, this is no longer the most
economically prudent approach.
With very few exceptions, the Bank is financially better
off by selling its distressed loans than working them out
internally. These results prove out for different workout
time horizons, credit concentrations and levels of interest
rates.
Our research and subsequent modeling work shows that
it is only when (1) loan sale prices are at a significant
discount to expected recovery values, (2) workout time
horizons are extremely short, (3) expected recovery is
high (over 98%), and (4) the size of the loan is large, that
the economics swing in favor of the “Hold” strategy.
Background
Traditionally Canadian banks have worked out their
nonperforming and high risk portfolios through utilization
of internal Special Loans Groups (SLG). Typically Special
Loans Assets are transferred to the SLG within the bank
for outsourced management. The assets are retained
on the books of the originating unit for capital and
MTR (the bank’s internal funds Marginal Transfer Rate)
considerations in respect of the funding position. An
agreement is typically reached with the SLG on the
estimated amount of recovery on the loan and the amount
of time it will take to effect recovery.
In many banks the performance measurement
methodologies currently applied to
SLGs exclude
consideration of the opportunity costs and capital costs
associated with maintaining on-balance sheet high-risk/
non-core and NPL exposures. It is therefore important
not to confuse how Banks rate the performance of their
Special Loans Groups with the overall cost to a Bank of
retaining “off-strategy” and NPL assets in-house. This is
because the performance measurement methodologies
currently applied to SLG activities exclude consideration
of the opportunity costs and capital costs associated with
w ww.ca nadi an h edgew a t c h .c om
maintaining these exposures.
We have constructed a model that allows for ready
analysis of the tradeoffs banks face in making the choice
between retaining high risk assets on the balance sheet or
mitigating the risk by selling them. In summary the costs
of retaining these assets on the books of the bank are:
•
The write-down and the capital hit associated with an
NPL exposure.
•
The increased capital allocation required to maintain
a lower-rated, down-migrating or NPL exposure and
potential continued underperformance over time (see
chart below).
•
Financing of the funding commitment to support the
facility.
•
The opportunity costs of not being invested in an
earning asset.
•
The cost of internal workout resources.
•
The cost of additional operational risk capital (a new
Basel II requirement) that must be borne by the SLG
unit dealing with the assets.
Continued on page 8
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7
Results
Continued from page 7
•
The risk of further direct financial loss.
•
Reputational and other losses that might ensue (these
contingencies are not captured under the Basel II
Operational Risk Capital Charge allocation rules).
The traditional SLG performance benchmarking model
does not take all variables into account and therefore
significantly understates the cost to the bank of maintaining
this function for all NPL and off-strategy contingencies.
Our empirical analysis shows that ROE differentials
between the SELL and the HOLD strategies can differ
by over 100% per annum in favor of the SELL strategy
ceteris paribus. These ROE comparators speak for
themselves. In all cases where workouts are expected to
take 6-12 months or more the SELL Strategy dominates
and significantly outperforms the HOLD strategy. These
results hold for both watchlisted and NPL loans.
It is only when loans are sold at significant discounts to
expected recovery values or where the workout horizon
is short (3 months) AND expected recovery is high
(98-100%) AND the size of the loan is large that the
economics swing in favor of the
HOLD strategy. These are tail
Capital Charges Under Various Approaches
events and can be mitigated
1988 Accord
through agreement on post2002 Foundation IRB – Corporate Benchmark Risk Weights
2002 Standardized Corprate Risk Weights
closing conditions.
Regulatory Capital Requirement (%)
The chart below, reprinted courtesy of Fitch, illustrates the
direct-drive relationship between asset risk and required
bank capital ratios under Basel II relative to what existed
until recently under the Basel I framework.
30
25
Conclusion
20
15
10
5
0
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Our research shows that when all of these costs and
considerations are taken into account, maintaining high
risk/non core or NPL exposures on the balance sheet
can only be justified under very restrictive assumptions
regarding outcomes and the ability of the SLG to deliver
compelling results within extremely narrow timeframes.
Our model is based around the behavior of the following
variables:
•
Immediate reduction for cash of impaired/high risk
loan portfolio.
•
Savings on capital allocations.
•
Redeployment of capital to productive uses and
avoidance of opportunity costs.
•
Increased profits and more optimal balance sheet
structure.
Financing of the funding commitment to support the
facility.
•
Savings on personnel costs.
•
More efficient tax planning related to asset disposals.
•
Workout time horizon
•
•
Recovery price arget
The possibility of bringing rehabilitated files back inhouse.
•
Market interest rates
•
Bank marginal transfer rate (MTR)
•
Credit concentrations and capital ratios
•
Credit migration probabilities
This article was written by Alex Jurshevski, the CEO
of Recovery Partners; and Irina Park, Intern, Recovery
Partners. Recovery Partners is a fund that invests in
off-strategy bank assets (www.recoverypartners.biz).
This version is an abridgment.
•
Bank workout costs
Copyright 2006 © Recovery Partners Limited
Probability of Default (%)
IRB – Internal ratings-based.
•
8
17
18
19
20
The financial analysis we
summarize above should
prompt banks to examine the
merits unloading off-strategy
and NPL mid-market assets
as opposed to retaining them
in-house. The advantages of
Active Portfolio Management
are significant:
www. c a n a dia n hedgewat ch.com
The Merits of Taking a Portfolio Approach in
Hedge Fund Investing
by Peter Klein, CFA
T
he theoretical foundation for taking a portfolio
approach to investing dates back to the pioneers of
modern finance – Harry Markowitz and Bill Sharpe.
The underlying theory, however, has been part of prudent
investment practice for a much longer time and is nothing
more than an application of the conventional wisdom “not
to put all your eggs in one basket”.
hopefully lead to a better return with equal or reduced risk
on the overall portfolio. The merits of this portfolio approach
when applied at the asset class level are particularly
evident as traditional investment markets continue to seek
direction while hedge funds outperform on a risk-adjusted
basis.
This approach should also be applied to investments
within each market sector. For example, it is prudent to
invest in a portfolio of equities instead of simply buying one
or two individual stocks because the risks of the individual
stocks will be offset to some extent. Surprisingly however,
the tendency for individual hedge fund managers to offset
each other is not well known by investors. Many investors
purchase only one or two individual managers and thus
ignore the potential benefits of diversification within the
hedge fund sector.
A single stock vs. a portfolio
In this light, the role of hedge funds as portfolio diversifiers
is becoming increasingly clear for many investors. Adding
non-directional investments should offset the risks in
traditional asset classes such as stocks and bonds and
w ww.ca nadi an h edgew a t c h .c om
For equity markets, the benefits of diversification can be
shown by comparing the risk in a single common stock
with the risk in a broadly diversified portfolio.
Continued on page 10
9
Continued from page 9
In Figure 1 we compare the risk in a single common stock
held by many Canadian investors – BCE Inc. – with the
risk in the overall S&P/TSX index which is a portfolio of
hundreds of stocks. In this comparison we measure risk
as standard deviation which is the most commonly used
– but not necessarily complete – method of measuring
risk. Conceptually, standard deviation tells us how much
actual returns will likely be scattered around the average
return. A low standard deviation means that the returns are
tightly clustered (low risk) while a high standard deviation
means that they are widely scattered (high risk). If all the
data values are equal – which would be the case if the
investment were riskless – then the standard deviation will
simply be zero.
standard deviations of 13.72% and 12.44% respectively.
In comparison, two popular hedge fund indices, CSFB/
Tremont Hedge Fund index and HFRI Fund of fund index,
Fig. 2: Annualized Standard Deviations of Hedge Funds
30.00%
25.00%
20.00%
13.72%
15.00%
26.27%
25.00%
16.40%
7.82%
10.00%
5.81%
5.00%
0.00%
10 Largest
Canadian
Hedge Funds
10 Largest
Global Hedge
Funds
CSFB/Tremont
Hedge Fund
HFRI Fund of
Funds
Sources: Globefund.com, Hedgefund.net, Credit Suisse/Tremont, Hedge Fund
Research, Inc. Based on monthly returns from May 1996 to June 2006.
Fig. 1: Annualized Standard Deviations of BCE and S&P/TSX
30.00%
12.44%
have much smaller standard deviations, 7.82% and 5.81%
respectively. This result suggests that diversification also
works in the hedge fund universe.
20.00%
A comment on overall risk
15.00%
It is interesting to note that hedge funds seem to be less
risky than stocks. Many investors are not aware of this
comparison. Both the individual hedge fund and hedge
fund index in Figure 2 have smaller standard deviations
than the individual stock and stock index in Figure 1. This
is a result of the tendency of hedge fund managers to
follow non-directional investment strategies which involve
significant hedging of positions and risks.
10.00%
5.00%
0.00%
BCE
S&P/TSX
Source: YAHOO! Finance. Based on monthly returns from May 1996 to June 2006.
Figure 1 shows the standard deviation of BCE Inc. is
roughly 60% higher than that for the S&P/TSX index. We
also calculated the standard deviation of other equities
commonly held by Canadian investors and found that on
average, it was roughly equal to that of BCE1. This implies
that buying a single Canadian stock will tend to expose
an investor to considerably more risk than a broadly
diversified portfolio.
A single hedge fund vs. a portfolio
Does diversification also work when it comes to hedge
funds? Let’s consider another example.
Figure 2 compares the standard deviations of single hedge
funds with those of diversified hedge fund indices. The risk
reported for the two categories of individual hedge funds is
actually the average of the ten largest Canadian hedge funds
and ten largest global hedge funds, which have annualized
1 From May 1996 to June 2006, the average annualized standard
deviation (based on monthly returns) of the 10 largest CDN stocks
since stock inception is 24.3% versus 26.3% for BCE. Source:
YAHOO!Finance
10
Implementing the portfolio approach
Prior to making an investment – in hedge funds or otherwise–
you must analyze your own needs and circumstances.
The following list provides typical considerations:
•
•
•
•
•
•
Investment knowledge, experience and expertise
Investment objectives
Risk tolerances
Time horizon
Size of allocation
Tax
There are literally thousands of hedge funds available for
investing. Not all are created equal. Many use complex
trading strategies. Assessing your investment knowledge,
experience and expertise, as well as the time you have
available, will let you know whether you need to solicit the
assistance of an investment advisor of some sort. If you do
not have the expertise to properly evaluate the strategies
employed by the hedge funds you would be considering
it may give you a bias towards outsourcing your due
diligence work to experts you trust. This is analogous to
www. c a n a dia n hedgewat ch.com
the decision to purchase an equity mutual fund instead of
picking stocks on your own.
Identifying your investment objectives and risk tolerances
may help to screen out many hedge funds from your
search, thereby making the job of selection somewhat
easier. It is critical to match the hedge fund(s) you invest in
with your objectives and risk profiles to ensure suitability.
Your needs and objectives may be best met by a single
strategy hedge fund, a multi-strategy hedge fund or a fund
of hedge funds.
Looking at your time horizon will further help you to
evaluate the suitability of the hedge fund for your needs
as some funds have low liquidity.
In addition to looking at your expertise, objectives,
tolerances and time horizon you must consider the size of
the investment you wish to make. Many hedge funds have
large minimum investment criteria, often exceeding US
$1,000,000. If you wish to ensure reasonable diversification
via roughly 20 hedge funds you may need an investment
of US $20,000,000 or more if you are to invest in the
hedge funds directly. You will also need a great deal of
time to analyze funds and build that portfolio.
An excellent alternative to building the portfolio yourself is
to invest in a fund of hedge funds which is a portfolio of
hedge funds built by seasoned professionals. This provides
you with diversification across funds and strategies with
much smaller allocations required.
Qualitative Analysis:
•
•
•
•
•
•
•
•
•
Clear strategy and the ability to implement it
Activities within scope of investment policy
Strength and experience of key personnel
Recent key personnel moves
Adequacy of risk controls and governance activities
Details of the Offering Memorandum and Subscription
Agreements
Macroeconomic drivers of returns and related
implications
Investment minimums and liquidity constraints
Fee structure and amounts
The Alternative Investment Management Association
(Canada) has generated a useful framework for evaluating
managers. The list can be found at:
http://www.aima-canada.org/doc_bin/AIMA_Investor_
Checklist-June14Final.pdf
The list includes the following sub-headings:
•
•
•
•
•
•
•
•
•
•
Due Diligence
Manager and Organization
Strategies and Risks
Performance
Liquidity
Fees and Commissions
Taxes
Principal Protected Notes
Offering Documents
Other Issues (Suitability, etc)
Your tax situation is also an important consideration. In
general, hedge funds are tax preferred as compared to
bond income. Some funds of hedge funds have a tax
structure that increases their attractiveness even further.
Armed with this information you are in a better position to
assess whether or not an investment in any hedge fund is
appropriate for your needs.
Analysis of hedge fund managers
Conclusion
Whether you choose to conduct the search yourself
or you rely on an investment consultant or fund of
hedge funds manager to develop the portfolio for you,
the evaluation of hedge fund managers includes many
steps. Typically the analysis of a manager can be broken
into two primary components: Quantitative Analysis and
Qualitative Analysis. This analysis must be conducted
prior to investment and should continue on a periodic
basis for as long as you own the fund.
The concept of diversification across and within asset
classes is well established. There is a strong case for
including hedge funds in an investment portfolio and good
reason to take a portfolio approach when doing so. We
expect investors will increasingly take this approach in
their hedge fund investments.
Quantitative Analysis:
•
•
•
•
•
Strategy review
Returns consistent with stated strategy
Track-record and volatility of returns
Returns expectations
Historical correlations with existing portfolio and other
asset classes
w ww.ca nadi an h edgew a t c h .c om
Peter Klein, Ph. D., CFA, CBV, CGA is co-portfolio
manager and principal of KCS Fund Strategies Inc. He
holds a Ph.D. in financial economics from the University
of Toronto, an MBA, LLB and B.Sc from the University
of Western Ontario. Prior to founding KCS, Dr. Klein
participated in a variety of capital markets activities for
a major Canadian Bank. He has priced, traded and
hedged billions of dollars in derivative securities and
developed trading models for a proprietary derivatives
trading desk. He is also a professor of finance at
Simon Fraser University. www.kcsfunds.com
11
Performance Tables
In addition to the investment style and asset size of each fund, performance is shown as a percentage increase or decrease: over 1, 3 and 6
months, current year-to-date, 1 year, 3 years and the life of the fund since inception. 3-year returns and Since Inception returns are calculated on
an annualized basis. The chart also shows the maximum drawdown, standard deviation over 1 and 3 years, the percentage high watermark and
the percentage of months in which the fund has realized positive returns.
Maximum Drawdown: Maximum percentage loss from the hedge fund's "peak to valley".
Standard Deviation: Statistical measure of volatility measuring the difference between the hedge fund's actual performance and its average
performance.
Percentage High-Water Mark: Expresses the current NAV as a percentage of the all-time high NAV for the fund.
Hedge Fund Performance Summary
November/December 2006
• Much has been said about the celebrated Canadian stock market performance in 2006 with the S&P/TSX Composite Index showing a
December gain of 1.22% and a 14.51% return for the year. The S&P/TSX 60 Index had an even more impressive year with a 1-month gain of
1.65% in December and annual return of 19.16%.
• CSFB/Tremont Hedge Fund Index was up 2.07% in November and 1.83% in December, pushing its annual return to12.85%. The breakdown by
style of the index in the November-December period shows the Emerging Market with the strongest performance, a 2.84% gain in November
and 3.15% in December, for a 20.49% annual return. During the same time period, only the Dedicated Short Bias showed a negative number
at -5.46% in November. It is also the only strategy among all hedging styles with a negative annual return of -6.61%.
• The CHW-HF Composite Index is showing similar gains: A November return of 1.54%, a December gain of 2.97% and a annual return of
12.23%. The CHW-HF Equity Hedged Index still shows the strongest performance at 17.95% annual return while the CHW-HF Fund-of-Funds
Index had the lowest annual return of 1.24%.
Changes in Rankings:
- •In the table for funds with the fewest negative months in 3 years, Arrow Goodwood Fund, One Financial Guaranteed Absolute Return Notes
and Hillsdale Canadian Long/Short Equity Fund have left the list. The new funds in the list are Tremont Core Diversified Fund, Dynamic
Alpha Performance Fund and Arrow WF Asia Fund.
• There are more than the usual number of changes to the top 13 list of the funds with the fewest negative monthly returns in a year. The funds
no longer on this lists are One Financial Guaranteed Absolute Return Notes, Dynamic Contrarian Fund, Millennium Bullion Fund, SciVest
US Equity Index Plus Fund, Focused Opportunities Fund and Dynamic Power Emerging Markets Fund. The ones that made the list this time
are Picton Mahoney Long Short Equity Fund, Lawrence Partners Fund LP, BNP - Mesirow Notes, Arrow Enhanced Income Fund,
Amethyst Arbitrage Fund and Trans IMS Global Market Neutral Fund.
• In the 3-year lowest volatility list, Abria Diversified Arbitrage Trust, Arrow Multi-Strategy Fund and Arrow High Yield Fund are replaced by
Tremont Core Diversified Fund, ONE Financial MSCI Hedge Invest Index Notes and Tremont Capital Opportunity Trust.
• Funds exiting the 1-year lowest volatility list are Abria Diversified Arbitrage Trust, TA3 – Hybrid No-Load, Abria Alternative Strategies Notes
and Horizons Tactical Hedge Fund. New funds on the list are Pro-Hedge Capital Preservation Fund, Arrow High Yield Fund, National
Life Multi-Strategy Fund, Redwood L/S Conservative Equity Fund and Tremont Core Diversified Fund.
• Four funds were removed from the highest 3-year return list: Lakeshore Financial Asset Account, Goodwood Fund, Front Street Canadian
Hedge Fund and Palos Income Trust Fund. They are replaced by The Friedberg Currency Fund, FG Limited Partnership, Sprott Bull/
Bear RSP Fund and Sprott Hedge Fund L.P. II.
• For the highest-return funds in 1 year, Skylon Global Resources Slpit Corp, Epic Limited Partnership, Epic Trust, Asset Logics US Long/Short
Equity Fund and SciVest US Equity Index Plus Fund were no longer on the top 13 list. The additions are Sextant Strategic Opportunities
Hedge Fund, Lawrence Partners Fund LP, Dynamic Power Emerging Markets Fund, Picton Mahoney Long Short Equity Fund and
Mineralfields/Energyfields Multi Series Fund
•
Of the funds reporting performance by the end of the year:
• DeltaOne Northern Rivers Fund L.P. had the highest most recent 3-month return of 45.06%.
• Sextant Strategic Opportunities Hedge Fund Ser F had the highest YTD return (116.87%) and the highest annualized standard deviation
(85.94%).
12
www. c a n a dia n hedgewat ch.com
H E D G E F U N D P E R F O R M A N C E (as of December 31, 2006)
Fund Name
Style
Asset
($MM)
1
month
3
month
6
month
YTD
1
year
3
year
Best 6mo.
(3 Year)
ITD
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
% Pos.
Month
Abria Alternative Combined Return Notes DSC
-
-
0.88
-3.58
-3.19
-2.90
-2.90
-
-1.52
2.50
-6.55
-6.55
5.93
-
94.27
78.26
Abria Alternative Strategies Notes Series 2
-
-
0.11
-4.10
-3.59
-6.17
-6.17
-
-3.69
1.10
-6.18
-10.16
4.89
-
89.94
66.67
Abria Alternative Strategies Notes Series 3 DSC
-
-
-0.54
-5.83
-5.44
-7.16
-7.16
-
-3.04
2.20
-7.77
-9.97
6.17
-
90.03
71.88
Abria Alternative Strategies Notes Series 3 FE
-
-
-0.54
-5.74
-5.15
-6.60
-6.60
-
-3.08
2.20
-7.50
-10.07
6.22
-
89.93
71.88
Abria Alternative Strategies Notes Series 4 FE
-
-
-0.33
-4.09
-3.59
-5.68
-5.68
-
-3.78
0.50
-5.66
-9.05
4.49
-
90.95
67.86
Abria Diversified Arbitrage Fund Class B $US
-
-
0.88
-6.26
-5.87
-1.19
-1.19
-
0.69
5.61
-5.97
-7.83
8.62
-
92.98
86.96
Abria Diversified Arbitrage Fund Class E $US
-
-
0.96
-5.97
-5.42
-0.26
-0.26
-
1.67
6.07
-5.45
-7.68
8.56
-
93.21
88.89
Abria Diversified Arbitrage Fund Class G $US
-
-
0.89
-6.24
-5.84
-1.15
-1.15
-
1.02
5.63
-5.94
-7.83
8.62
-
92.99
81.25
Abria Diversified Arbitrage Trust Class B $US
-
-
0.65
-6.76
-6.46
-1.93
-1.93
0.95
5.12
5.54
-6.46
-8.07
8.81
5.35
92.53
86.59
Abria Diversified Arbitrage Trust Class C $CAD
-
-
0.59
-6.92
-6.71
-3.00
-3.00
0.08
4.70
4.63
-6.87
-8.05
8.66
5.25
92.49
85.37
Abria Diversified Arbitrage Trust Class E $US
-
-
0.74
-6.42
-5.95
-0.91
-0.91
2.28
2.27
6.00
-5.95
-7.89
8.72
5.22
92.80
83.33
Abria Diversified Arbitrage Trust Class O $US
-
-
0.86
-6.02
-5.39
0.97
0.97
3.54
4.11
7.30
-5.39
-7.68
8.74
5.24
93.11
83.72
Abria Diversified Arbitrage Trust Class P $CAD
-
-
0.77
-6.27
-5.73
-0.32
-0.32
2.57
3.01
6.24
-5.73
-7.72
8.61
5.13
92.99
83.33
Abria Energy Trust Class C $CA
-
-
2.30
-2.33
-3.29
-5.06
-
-
-
-
-
-7.19
-
-
94.94
50.00
Abria Energy Trust Class F $CA
-
-
2.39
-1.99
-2.78
-4.47
-
-
-
-
-
-6.70
-
-
95.53
50.00
Abria Energy Trust Class O $US
-
-
2.63
-0.96
-1.34
-1.34
-
-
-
-
-
-3.87
-
-
98.66
57.14
Abria Energy Trust Class P $CA
-
-
2.53
-1.47
-2.00
0.14
-
-
-
-
-
-4.42
-
-
98.00
62.50
Abria Guaranteed Alternative Income Notes Ser 1 FE
-
-
0.45
-1.88
-5.24
-8.19
-8.19
-
-6.12
0.25
-7.11
-12.02
5.60
-
88.38
60.87
-6.12
Abria Guaranteed Alternative Income Ntes Ser 1 DSC
-
-
0.45
-1.88
-5.24
-8.19
-8.19
-
0.25
-7.11
-12.02
5.60
-
88.38
60.87
Adaly Opportunity Fund Class A
Enh. Eq.
-
1.71
0.15
-1.97
7.43
12.29
18.80
33.74
-5.22
-7.81
12.35
12.99
96.40
78.57
Adaly Opportunity Fund Class B
Enh. Eq.
6.72
11.30
17.57
32.47
-5.29
-7.72
12.08
12.78
96.29
74.36
AGF Managed Futures Fund
Dir.
-5.33
46.46
-51.43
-87.66
37.88
46.03
13.13
49.29
Amethyst Arbitrage Fund
13.11
-0.16
-2.71
6.10
-
97.29
88.24
31.50
-6.82
-10.84
22.33
16.03
89.16
68.75
72.34
-
1.66
0.02
-2.15
20.714
-12.50
-1.18
-29.41
-
-
-2.71
-1.43
-0.16
11.77
10.92
-
Arrow Clocktower Platinum Fund
-
38.876
-6.67
-1.09
-0.65
18.87
18.87
12.22
Arrow Clocktower Platinum Fund Class F
-
-
-5.46
0.33
0.99
21.31
21.31
9.80
20.12
-6.42
-16.02
21.90
17.34
90.76
Arrow Compass Fund U$
-
-
1.37
1.14
-0.22
7.94
9.43
-
5.42
11.73
-2.54
-3.20
5.04
-
98.80
75.76
Arrow Distressed Securities Fund Class A
-
37.116
2.33
7.79
-1.81
15.28
15.28
-
6.08
17.75
-6.89
-11.61
15.21
-
95.27
55.56
Arrow Distressed Securities Fund Class F
-
-
2.41
8.02
-1.39
16.26
16.26
-
6.86
18.22
-6.51
-11.37
15.23
-
95.74
55.56
Arrow Elkhorn U.S. Long/Short Fund
Enh. Eq.
-
1.00
5.34
4.40
17.54
17.54
9.45
8.02
14.08
-1.14
-8.17
5.67
6.71
100.00
64.00
Arrow Elkhorn U.S. Long/Short Fund Class F
Enh. Eq.
-
1.08
5.56
4.82
18.50
18.50
10.85
8.59
16.38
-0.72
-4.36
5.67
6.76
100.00
75.56
11.07
Arrow Elmwood Fund Class F
-
-
0.57
6.23
-2.99
-7.98
-7.98
-
-5.68
12.82
-23.11
-25.04
18.65
-
81.69
71.43
Arrow Enhanced Income Fund Class A
-
5.436
1.04
2.23
1.52
4.99
4.99
-
1.43
4.11
-2.19
-2.64
2.15
-
100.00
56.00
Arrow Enhanced Income Fund Class F
-
-
1.12
2.45
1.95
5.86
5.86
-
2.28
4.45
-1.76
-1.76
2.15
-
100.00
64.00
Arrow Enhanced Income Fund Class G U$
-
-
1.12
2.42
1.96
5.45
5.45
-
2.04
4.13
-1.73
-1.91
2.00
-
100.00
60.00
Arrow Enhanced Income Fund Class U U$
-
Arrow Enso Global Fund
Enh. Eq.
Arrow Enso Global Fund Class F
Arrow Epic Capital Fund
Arrow Epic Capital Fund Class F
Enh. Eq.
Arrow Focus Fund Class A2
Dir.
Arrow Focus Fund Class F2
-
-
1.04
2.21
1.51
4.64
4.64
-
1.10
3.32
-2.15
-2.54
2.02
-
100.00
56.00
49.933
2.17
7.62
5.02
13.34
13.34
9.46
11.62
12.44
-4.28
-6.14
9.37
7.05
100.00
66.67
Enh. Eq.
-
2.23
7.83
5.45
14.24
14.24
9.69
12.88
-3.91
-5.98
9.40
7.06
100.00
67.39
Enh. Eq.
69.621
7.30
9.48
11.27
28.51
28.51
23.83
41.74
-13.94
-13.94
21.12
19.22
100.00
69.09
28.09
-13.57
-15.71
21.14
21.11
100.00
59.57
11.73
-9.29
-17.74
9.13
14.09
98.89
53.73
16.47
-5.63
-6.37
9.31
-
99.51
64.29
70.59
Arrow Focus Fund Class U2
Dir.
Arrow Global Equity Long/Short Notes Series 1
-
Arrow Global Long/Short Fund
Enh. Eq.
-
7.38
9.70
11.72
29.60
29.60
8.99
15.817
2.17
6.05
3.69
11.02
11.02
4.80
-
2.24
6.28
4.13
12.25
12.25
-
3.99
15.817
2.15
6.03
3.65
11.07
11.07
13.03
23.77
-6.81
-9.70
9.15
12.26
98.87
-
1.34
4.91
5.29
5.55
5.55
-
2.52
7.87
-4.65
-6.25
7.38
-
98.70
75.00
33.896
2.26
7.08
5.38
10.76
10.76
9.82
5.46
16.08
-5.50
-15.83
8.76
6.90
99.87
59.70
Arrow Global Long/Short Fund Class F
Enh. Eq.
-
2.33
7.30
5.82
11.81
11.81
-
16.45
-5.02
-6.31
8.72
-
100.00
69.70
Arrow Global Long/Short Fund Class G U$
Enh. Eq.
-
0.24
2.65
1.17
11.74
11.74
-
22.79
-4.18
-6.07
11.26
-
96.55
72.73
Arrow Global Long/Short Fund Class U U$
Enh. Eq.
33.896
2.24
7.05
5.32
10.82
10.82
8.60
9.97
16.09
-5.46
-12.85
8.75
8.69
99.88
63.16
Arrow Goodwood Fund
Enh. Eq.
83.279
1.52
4.62
9.84
9.94
9.94
19.14
11.70
39.63
-7.53
-26.88
9.78
12.98
99.19
65.67
Arrow Goodwood Fund Class F
Enh. Eq.
-
-21.37
4.82
10.26
10.78
10.78
18.40
35.76
-7.18
-21.37
36.43
23.01
78.63
71.15
Arrow High Yield Fund
Dir.
118.311
0.76
4.19
6.53
8.11
8.11
3.85
5.64
8.39
-7.30
-8.46
3.24
5.25
100.00
62.07
Arrow High Yield Fund Class F
Dir.
-
0.82
4.42
6.98
9.02
9.02
4.10
6.03
8.89
-8.56
-9.82
3.26
5.61
100.00
63.83
Arrow Japan Long/Short Fund
-
15.000
-0.11
0.27
-0.65
-
-9.47
-0.65
-10.21
-12.01
5.57
-
89.12
38.46
w ww.ca nadi an h edgew a t c h .c om
13
H E D G E F U N D P E R F O R M A N C E (as of December 31, 2006)
Fund Name
Arrow Japan Long/Short Fund Class F
Style
-
Asset
($MM)
1
month
3
month
-
-0.05
0.48
6
month
YTD
1
year
3
year
-0.26
-9.58
-9.58
ITD
-
-8.87
Best 6mo.
(3 Year)
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
-0.26
-9.85
-11.48
5.54
-
89.77
% Pos.
Month
38.46
Arrow Multi-Strategy Fund
Dir.
106.797
2.18
5.31
3.17
10.49
10.49
7.83
6.36
13.38
-3.04
-4.45
6.60
5.26
100.00
65.52
Arrow Multi-Strategy Fund Class F
Dir.
-
2.25
5.53
3.61
11.38
11.38
8.65
9.42
13.84
-2.91
-4.11
6.58
7.22
100.00
68.09
Arrow Multi-Strategy Fund Class G U$ Class F
Dir.
-
2.23
5.53
3.49
11.40
11.40
-
9.30
13.94
-2.70
-4.18
6.64
-
100.00
63.64
Arrow Multi-Strategy Fund U$
Dir.
106.797
2.17
5.30
3.11
10.50
10.50
6.79
13.43
-3.29
-6.98
6.61
6.43
100.00
63.16
Arrow Multi-Strategy Notes Series 1
Dir.
-
2.15
4.83
3.78
11.35
11.35
6.43
7.34
13.04
-3.58
-4.15
6.52
5.50
100.00
67.44
Arrow Multi-Strategy Notes Series 2
Dir.
-
2.02
4.77
3.95
10.97
10.97
5.65
5.60
11.58
-3.14
-3.80
6.13
6.40
100.00
65.00
Arrow Multi-Strategy Notes Series 3
Dir.
-
1.97
4.76
4.30
10.24
10.24
4.49
4.49
10.79
-3.14
-3.72
6.07
5.78
100.00
63.89
Arrow Multi-Strategy Notes Series 3 (FE)
-
-
2.01
4.89
1.99
11.77
11.77
-
5.21
15.65
-4.87
-8.63
11.59
-
95.84
63.64
Arrow Multi-Strategy Notes Series 4
-
-
1.92
4.52
4.08
9.18
9.18
-
6.39
10.05
-3.24
-3.80
5.87
-
100.00
70.00
Arrow Multi-Strategy Notes Series 4 (FE)
-
-
1.96
4.63
1.86
9.64
9.64
-
6.63
8.81
-3.03
-3.63
5.40
-
100.00
63.33
Arrow Multi-Strategy Notes Series 5
-
-
1.83
4.33
3.91
8.34
8.34
-
5.23
9.15
-3.27
-3.76
5.64
-
100.00
73.33
Arrow Multi-Strategy Notes Series 5 (FE)
-
-
1.87
4.42
4.10
8.74
8.74
-
6.46
9.36
-3.08
-3.60
5.63
-
100.00
73.08
Arrow Multi-Strategy Notes Series 6
-
-
1.51
4.23
3.67
5.20
5.20
-
1.74
6.52
-3.59
-4.56
5.31
-
99.48
66.67
Arrow PMC Global Long/Short Fund Class A
-
10.592
-0.22
4.49
9.92
15.70
15.70
-
16.26
-0.83
-5.65
8.32
-
99.78
68.00
Arrow PMC Global Long/Short Fund Class F
-
-
-0.15
4.71
10.36
16.63
16.63
-
12.35
-0.52
-4.54
8.32
-
99.85
68.00
Arrow Voyageur Fund U$
-
-
1.98
3.73
0.19
9.56
12.09
-
16.46
-4.19
-6.18
7.86
-
97.98
84.85
Arrow WF Asia Fund
Enh. Eq.
31.031
3.49
16.76
16.29
18.60
18.60
14.20
18.57
-8.82
-18.50
16.81
13.56
100.00
66.15
19.12
19.12
Arrow WF Asia Fund Class F
Enh. Eq.
Asset Logics Managed Futures Hedge Fund
Dir.
Asset Logics Special Situations Fund
Asset Logics US Long-Short Equity Fund U$
5.72
-
3.53
16.92
16.61
0.134
-9.49
-11.62
-13.78
16.75
21.20
-8.68
-13.38
16.81
13.79
100.00
76.09
0.97
-26.99
-61.98
12.32
16.90
38.02
43.18
-
-
-2.19
17.19
18.53
35.80
35.80
-
1.461
-1.94
0.08
2.59
11.64
11.64
-
36.02
-1.33
-8.30
22.43
-
97.81
68.42
-
27.75
-1.90
-3.16
8.70
-
98.06
BDC Managed Futures Note Series N-8
-
150.000
0.84
1.68
2.41
0.05
0.05
-1.23
63.64
10.24
-11.12
-13.03
4.00
7.33
92.32
56.41
BDC Managed Futures Notes Series N-3
Dir.
11.000
0.39
1.06
-0.57
0.21
0.21
-2.07
0.41
5.31
-9.36
BDC Managed Futures Notes Series N-4
Dir.
32.000
1.06
2.05
0.48
0.02
0.02
-2.23
1.09
6.76
-10.59
-10.62
2.94
5.35
90.60
52.17
-12.58
3.57
6.11
89.54
49.18
BDC Managed Futures Notes Series N-5
Dir.
36.000
1.50
2.58
0.27
-0.27
-0.27
-1.84
2.93
8.51
-10.49
-12.23
4.01
6.42
90.66
53.45
BDC Managed Futures Notes Series N-6
Dir.
43.000
0.58
1.11
1.79
0.99
0.99
-1.17
0.09
9.14
-10.60
-12.48
3.27
6.58
92.50
55.56
BDC Managed Futures Notes Series N-7
Dir.
91.000
0.71
1.41
2.38
0.39
0.39
-1.11
-1.20
9.60
-10.82
-14.07
3.77
7.02
91.20
55.10
BDC Managed Futures Notes Series N-7A
Dir.
224.000
0.79
1.52
2.24
0.27
0.27
-1.23
-1.27
9.59
-10.89
-14.51
3.79
7.04
90.47
53.33
Belmont Dynamic Growth Fund
-
-
-0.50
-10.48
-
-
-
-
-
-
-10.48
-
-
89.52
33.33
BluMont Canadian Opportunities Fund
Enh. Eq.
-
1.08
-2.48
-5.73
-1.87
7.95
19.71
-8.89
-19.40
8.58
9.47
92.09
66.67
-23.46
-1.55
-8.76
-1.65
BluMont Hirsch Long/Short Fund
Non-Dir.
-
3.54
2.90
0.76
9.29
11.18
9.44
18.71
-6.25
-8.88
12.00
11.24
97.14
68.00
BluMont Hirsch Long/Short Fund F Series
Non-Dir.
-
3.56
3.11
1.14
10.01
12.06
10.03
19.16
-5.78
-8.52
11.88
11.33
97.62
65.38
BluMont Hirsch Performance Fund
-
-
2.79
2.17
1.92
9.81
11.74
11.99
20.51
-6.37
-20.73
13.02
11.45
97.17
64.86
BluMont MAN Multi-Strategy Notes Series 1
Dir.
-
2.80
3.36
1.80
6.45
6.87
4.58
4.46
13.77
-11.31
-12.29
9.38
8.67
96.59
62.16
BluMont MAN Multi-Strategy Notes Series A
Dir.
-
2.63
3.09
1.42
6.24
6.63
-
3.57
13.63
-10.38
-10.38
9.37
-
96.28
58.82
BluMont MAN Multi-Strategy Series 2 Notes
Dir.
-
2.76
3.37
1.94
6.37
6.88
-
3.87
13.72
-10.80
-10.80
9.28
-
96.68
58.82
BluMont MAN Multi-Strategy Series 3 Notes
-
-
2.69
3.28
1.82
5.89
6.37
-
7.54
13.04
-5.93
-8.59
9.11
-
96.60
66.67
BluMont MAN Multi-Strategy Series 4 Notes
-
-
2.68
3.21
1.75
5.58
6.09
-
5.39
13.00
-6.04
-8.71
9.11
-
96.48
60.00
BluMont MAN Multi-Strategy Series 5 Notes
-
-
2.57
3.09
2.11
4.22
4.48
-
5.14
9.72
-5.16
-7.97
8.02
-
97.28
65.00
BluMont MAN-IP 220 Series 1 Notes
Dir.
-
4.27
1.73
-4.30
-0.02
-0.80
7.81
6.51
20.84
-17.61
-19.18
15.92
15.64
88.56
55.56
BluMont MAN-IP 220 Series 2 Notes
Dir.
-
4.33
1.85
-4.11
-0.19
-0.96
7.78
5.55
20.56
-18.49
-20.04
15.90
15.66
88.58
57.14
BluMont MAN-IP 220 Series 3 Notes
-
-
4.31
2.90
-2.83
-2.83
-
-
-
-
-
-8.73
-
-
97.17
57.14
BluMont MAN-IP 220 Series 4 Notes
-
-
-1.26
-1.26
-
-1.26
-
-
-
-
-
-1.26
-
-
98.74
75.00
BNP - Mesirow Notes Series 1
Non-Dir.
-
1.42
3.08
4.33
6.21
6.21
2.92
3.48
4.33
-2.46
-2.49
2.70
2.63
100.00
72.34
BNP - Mesirow Notes Series 2
Non-Dir.
-
1.42
3.09
4.33
6.21
6.21
3.71
3.61
4.33
-1.34
-2.28
2.70
2.61
100.00
75.56
BNP - Mesirow Notes Series 3
Non-Dir.
-
1.42
3.08
4.33
6.21
6.21
3.69
3.54
4.33
-1.39
-2.28
2.70
2.61
100.00
74.42
CEO Fund
Enh. Eq.
10.492
2.64
-1.47
-2.14
-17.35
-5.60
25.87
-29.53
-68.76
31.90
21.33
38.75
51.96
CI Global Opportunities Fund
Dir.
23.500
-1.33
0.34
-7.25
-3.00
-3.00
-2.61
16.73
-14.42
-39.28
16.99
13.81
66.18
59.57
CI Global Opportunities Fund U$
-
-
-3.36
-3.78
-11.23
-3.30
-3.30
1.35
-0.86
23.66
-14.65
-46.22
21.57
18.46
79.80
45.88
CI Global Opportunities II Fund
Dir.
14.200
-0.85
0.99
-6.00
-0.85
-0.85
-1.93
5.81
15.38
-12.76
-38.03
15.83
12.83
68.74
53.06
Creststreet Energy Hedge Fund LP Series I
-
-
0.18
4.51
-3.67
-
2.69
44.34
-24.76
-31.32
18.76
-
72.17
57.14
14
www. c a n a dia n hedgewat ch.com
H E D G E F U N D P E R F O R M A N C E (as of December 31, 2006)
Fund Name
Style
Asset
($MM)
1
month
3
month
6
month
YTD
1
year
3
year
ITD
Best 6mo.
(3 Year)
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
% Pos.
Month
Creststreet Energy Hedge Fund LP Series II
-
-
0.10
4.26
-4.14
-
0.76
33.93
-25.12
-31.84
18.77
-
71.51
55.00
Creststreet Energy Hedge Fund LP Series III
-
-
0.10
4.26
-4.14
-
-3.24
32.23
-25.12
-31.84
18.77
-
71.51
52.63
Creststreet Energy Hedge Fund LP Series IV
-
-
0.12
4.32
-4.03
-
-9.25
20.63
-25.04
-31.72
18.77
-
71.67
50.00
Creststreet Energy Hedge Fund LP Series V
-
-
0.18
4.52
-3.66
-
11.50
-24.75
-31.31
18.76
-
72.19
47.06
Creststreet Energy Hedge Fund LP Series VI
-
-
0.11
4.31
-4.04
-
-4.04
-24.98
-32.14
18.78
-
71.22
43.75
Creststreet Energy Hedge Fund LP Series VII
-
-
0.18
4.52
-3.66
-3.66
-24.75
-31.31
18.76
-
72.19
46.67
Creststreet Energy Hedge Fund LP Series VIII
-
-
0.08
3.09
-
3.09
-
-
-
-
-
0.00
-
-
100.00
100.00
Criterion Divers Commodities Currency Hedged B
-
-
-4.88
3.83
-4.03
-4.03
-
-
-
-
-
-10.06
-
-
93.38
57.14
Criterion Divers Commodities Currency Hedged C
-
-
-4.86
3.88
-3.93
-3.93
-
-
-
-
-
-10.04
-
-
93.46
57.14
Criterion Divers Commodities Currency Hedged E
-
-
-4.92
3.87
-3.90
-3.90
-
-
-
-
-
-9.97
-
-
93.51
57.14
Criterion Divers Commodities Currency Hedged F
-
-
-4.79
4.16
-3.42
-3.42
-
-
-
-
-
-9.78
-
-
93.97
57.14
CWB Managed Futures Notes Series N-09
-
94.000
0.77
1.59
2.73
0.03
0.03
-
-0.92
9.19
-5.05
-7.43
4.13
-
95.82
57.58
CWB Managed Futures Notes Series N-10
-
46.000
1.43
2.69
1.49
-1.06
-1.06
-
0.11
3.45
-4.93
-7.27
4.34
-
95.22
55.56
CWB Managed Futures Notes Series N-11A
-
34.000
1.46
2.83
1.59
-1.34
-1.34
-
0.00
2.53
-5.26
-5.75
4.66
-
96.92
52.38
CWB Managed Futures Notes Series N-11B
-
6.000
1.58
3.20
2.25
-0.10
-0.10
-
1.10
3.12
-4.68
-5.27
4.66
-
97.76
61.90
CWB Managed Futures Notes Series N-12B
-
8.000
-0.49
1.25
0.54
-3.64
-
-
-
-
-
-4.83
-
-
96.36
44.44
DeltaOne Energy Fund LP
Dir.
5.500
-6.46
-26.01
-58.92
-26.84
-5.00
106.24
-60.97
-82.44
52.39
57.49
17.56
50.98
DeltaOne Northern Rivers Fund L.P.
Enh. Eq.
-
18.45
45.06
36.28
35.71
62.57
-13.34
-18.42
28.73
23.99
100.00
65.00
DeltaOne Strategic Energy Fund
Enh. Eq.
Dynamic Alpha Performance Fund
Dir.
Dynamic Alpha Performance Fund Series F
Dynamic Contrarian Fund
Dynamic Contrarian Fund Series F
-
7.000
-0.17
-8.06
-21.89
11.068
1.95
10.78
9.53
-
-
-
-
-
-29.81
-
-
70.19
40.00
5.94
13.80
9.02
13.58
-12.56
-15.50
13.01
10.27
99.12
63.64
-
0.830
2.30
11.74
10.81
-
101.876
6.91
10.40
15.86
7.03
7.03
-
7.03
10.81
-11.96
-15.12
13.52
-
100.00
58.33
50.41
50.41
-
68.61
3.58
-5.97
20.18
-
100.00
-
27.402
7.19
11.06
16.81
52.22
77.78
52.22
-
68.67
4.17
-5.83
20.22
-
100.00
77.78
5.94
Dynamic Power Emerging Markets Fund
-
28.343
7.48
27.33
31.47
51.70
51.70
-
54.24
-5.26
-13.42
22.78
-
100.00
76.47
Dynamic Power Emerging Markets Fund Series F
-
81.426
7.49
32.06
34.53
53.20
53.20
-
51.24
-6.46
-12.57
23.44
-
100.00
76.47
Dynamic Power Hedge Fund Class A
Dir.
80.277
15.42
44.35
38.59
72.56
72.56
-
78.16
-22.61
-22.61
40.76
-
100.00
66.67
Dynamic Power Hedge Fund Class F
Dir.
345.901
14.63
42.01
36.68
71.47
71.47
54.74
86.26
-21.94
-21.94
39.99
36.78
100.00
69.09
Epic Limited Partnership
Enh. Eq.
108.600
6.59
8.75
10.63
24.84
24.84
22.01
37.31
-9.90
-10.36
18.00
16.74
100.00
79.73
Epic Trust
-
12.100
4.72
6.76
8.56
22.29
22.29
-
37.07
-3.84
-10.62
17.58
-
99.30
62.50
FG Limited Partnership
-
-
4.93
9.87
7.35
13.48
13.95
19.20
23.82
-3.30
-9.04
9.32
11.98
100.00
68.75
Front Street Canadian Hedge Fund
Dir.
179.757
3.32
12.37
10.44
18.98
18.98
18.29
23.92
-4.11
-40.77
13.12
12.95
100.00
67.78
Front Street Mining Opportunities Fund
-
72.423
0.75
19.81
24.39
56.84
56.84
-
67.92
-5.78
-13.14
27.21
-
100.00
70.83
Front Street Performance Fund II
-
132.974
4.74
14.02
11.27
21.96
21.96
-
20.21
-3.69
-9.70
15.38
-
100.00
66.67
Front Street Rollover Fund Limited
-
33.656
0.55
17.91
7.43
2.63
-
-
-
-
-
-23.57
-
-
90.12
72.73
FrontierAlt All Terrain Global Commodities Fund
-
-
0.59
5.55
1.68
-3.47
-3.47
-
-6.07
12.60
-11.16
-18.47
12.84
-
86.05
50.00
Full Cycle Energy Limited Partnership I
Dir.
13.000
0.49
1.37
2.85
2.50
2.50
18.05
32.15
-6.45
-9.27
9.30
13.91
96.43
62.50
Goodwood Fund Class A
Enh. Eq.
67.270
1.52
4.65
10.14
10.73
10.73
18.01
32.23
-7.09
-26.08
8.82
11.24
99.72
66.67
Goodwood Fund Class B
Enh. Eq.
173.317
1.34
3.79
8.12
8.55
8.55
15.56
9.48
29.92
-6.75
-26.08
8.10
10.48
99.38
65.57
Guaranteed Investment Solutions Series 1
-
-
0.69
1.55
1.68
0.72
0.72
-
-0.42
1.68
-2.73
-4.38
2.43
-
98.19
68.00
Guaranteed Investment Solutions Series 2
-
-
0.70
1.48
2.14
1.76
1.76
-
0.31
2.14
-2.32
-3.08
2.13
-
99.49
71.43
Hillsdale Canadian Long/Short Equity Fund Class A
Enh. Eq.
45.197
-1.53
-2.35
-7.63
-8.85
-8.85
11.44
24.18
-7.63
-18.99
7.88
10.26
88.12
65.88
Hillsdale Canadian Long/Short Equity Fund Class I
Enh. Eq.
44.316
-1.42
-2.06
-7.08
-7.81
-7.81
13.30
25.88
-7.08
-18.27
7.85
10.54
89.05
64.62
Hillsdale Canadian Market Neutral Equity
Non-Dir.
5.439
2.60
4.56
-3.28
-1.68
-1.68
2.55
3.55
9.05
-6.78
-12.57
9.36
7.01
94.79
60.49
Hillsdale Canadian Market Neutral Equity Class I
-
4.865
2.68
4.82
-2.92
-0.89
-0.89
-
3.37
8.61
-6.42
-9.28
9.38
-
95.10
66.67
53.85
Hillsdale US Long/Short Equity Fund Class A U$
Enh. Eq.
8.740
2.62
4.24
5.22
13.41
13.41
11.05
2.98
13.24
-5.42
-37.56
8.04
8.40
100.00
Horizons Diversified Fund
-
0.607
3.36
3.92
1.87
3.51
3.51
-
2.12
5.95
-4.86
-6.78
8.45
-
97.88
62.96
Horizons Mondiale Fund
Dir.
51.963
0.87
3.30
3.79
9.09
9.09
2.04
7.81
5.11
-5.04
-7.74
4.62
4.50
100.00
61.06
Horizons Tactical Hedge Fund
Dir.
0.153
1.48
-0.44
-5.16
-6.99
-6.99
-0.90
-0.78
6.67
-8.24
-9.10
3.89
6.30
92.24
44.44
HRS Absolute Return Trust
-
-
3.06
3.67
1.92
8.20
-
-
-
-
-
-1.97
-
-
100.00
81.82
HSBC STAIRS C1 C$
-
-
1.56
2.56
-2.21
3.60
8.24
-
7.96
17.37
-7.47
-8.63
9.78
-
93.98
73.91
HSBC STAIRS C2 C$
-
-
1.72
2.75
-2.18
5.01
8.01
-
9.29
17.12
-7.59
-8.74
9.92
-
94.00
64.71
IA Multi-Strategy
Dir.
0.979
1.18
2.85
2.26
3.15
3.15
1.55
2.26
5.48
-2.34
-3.92
4.62
3.13
98.81
56.25
w ww.ca nadi an h edgew a t c h .c om
15
H E D G E F U N D P E R F O R M A N C E (as of December 31, 2006)
Fund Name
Style
Asset
($MM)
1
month
3
month
6
month
YTD
1
year
3
year
Best 6mo.
(3 Year)
ITD
IAP Multi-Strategy
-
1.048
1.18
2.85
2.26
3.15
3.15
1.55
J.C. Clark Focused Opportunities Fund
-
2.834
1.86
6.28
6.09
13.94
13.94
-
J.C. Clark Preservation Trust
Non-Dir.
44.383
0.04
6.10
7.12
10.82
10.82
-2.99
KCS Absolute Core Retrun Fund Class B
-
-
1.27
-
-
1.27
-
-
-
KCS Absolute Core Return Fund
-
7.303
1.34
6.04
4.24
15.10
15.10
-
King & Victoria RSP Fund Class A Units
-
-
3.08
4.52
6.93
1.09
1.09
-
Lake Shore Financial Asset Account Inc U$
Dir.
-
0.03
1.43
1.46
5.73
5.73
17.75
Landry Morin Long Short Momentum Fund Series F
-
-
0.07
2.61
-3.74
1.54
1.54
10.26
Lawrence Partners Fund LP
-
-
7.21
18.78
20.72
74.74
74.74
-
Leeward Bull & Bear Fund L.P.
-
Mac Alternative Strategies
Dir.
Mac Alternative Strategies Class F
-
Mac Alternative Strategies Class F U$
-
Mac Alternative Strategies Class I
-
2.25
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
% Pos.
Month
5.48
-2.34
-3.92
4.62
3.13
98.81
58.33
16.49
-0.76
-3.35
7.33
-
100.00
80.00
8.73
-14.25
-21.48
6.26
8.19
89.24
61.29
-
-
0.00
-
-
100.00
100.00
3.81
18.57
-12.01
-12.01
9.80
-
100.00
67.74
0.31
20.87
-15.47
-22.09
8.61
-
83.31
66.67
20.39
0.76
-75.24
4.33
7.14
55.42
71.97
12.63
-5.76
-9.07
8.88
10.76
95.69
63.64
53.20
5.72
-4.85
21.75
-
100.00
86.67
21.82
-25.83
-25.83
11.93
13.55
100.00
63.49
7.98
-2.01
-4.62
3.99
3.78
100.00
69.44
73.24
11.77
-
3.01
2.26
10.07
11.09
15.52
2.74
107.217
2.04
4.30
5.87
8.11
8.11
5.63
-
2.14
4.63
6.55
9.54
9.54
7.17
5.75
8.69
-1.35
-3.55
3.98
4.03
100.00
-
-0.01
0.30
1.96
9.50
9.50
10.90
11.85
17.06
-3.69
-6.54
9.41
8.96
98.60
67.69
-
2.13
4.59
6.47
9.41
9.41
6.93
5.64
8.63
-1.39
-3.63
3.97
4.03
100.00
72.46
4.84
Mac Alternative Strategies Class I U$
-
-
-0.01
0.25
1.89
9.36
9.36
10.65
11.68
17.01
-4.08
-6.04
9.40
9.00
98.53
69.23
Mac Alternative Strategies Class O
-
-
2.26
5.02
7.36
11.26
11.26
8.71
7.86
9.54
-0.56
-2.54
3.95
4.07
100.00
75.00
Mac Alternative Strategies Class O U$
-
-
0.11
0.66
2.73
7.88
7.88
7.70
11.54
18.01
-12.60
-12.78
8.65
11.31
99.50
73.33
Mac Alternative Strategies U$
-
66.698
-0.10
-0.02
1.31
8.07
8.07
6.50
9.12
16.27
-9.08
-11.25
9.41
10.44
97.86
66.13
Mackenzie Sentinel US Managed Yield Class Ser A U$
-
166.197
0.37
1.33
2.29
4.41
4.41
2.44
1.63
2.30
0.09
0.00
0.30
0.53
100.00
100.00
Mackenzie Sentinel US Managed Yield Class Ser B U$
-
1.751
0.37
1.35
2.33
4.46
4.46
-
2.56
2.33
0.11
0.00
0.30
-
100.00
100.00
Man Multi-Strategy (Canada) Fund Class A C$
-
-
1.13
1.84
-6.33
2.96
6.46
-
3.66
13.66
-6.33
-8.02
8.87
-
93.67
65.00
Man Multi-Strategy (Canada) Fund Class A U$
-
-
0.54
2.63
-6.53
6.95
11.99
-
8.43
19.82
-6.53
-8.92
12.71
-
93.47
60.00
Man Multi-Strategy (Canada) Fund Class F C$
-
-
1.13
1.84
-6.01
3.58
7.10
-
4.25
13.96
-6.01
-7.71
8.84
-
93.99
65.00
Man Multi-Strategy (Canada) Fund Class F U$
-
-
0.54
2.63
-6.22
7.59
12.66
-
11.97
20.13
-6.22
-8.62
12.69
-
93.78
68.42
Man Multi-Strategy (Canada) Fund Class O C$
-
-
1.13
3.07
-5.19
3.13
-
-
-
-
-
-8.02
-
-
94.81
63.64
Man Multi-Strategy (Canada) Fund Class O U$
-
-
0.54
4.02
-5.26
7.27
-
-
-
-
-
-8.92
-
-
94.74
54.55
Man Multi-Strategy (Canada) Fund Class Q C$
-
-
1.13
3.05
-4.90
-1.61
-
-
-
-
-
-7.71
-
-
95.10
62.50
Man Multi-Strategy (Canada) Fund Class Q U$
-
-
0.54
3.99
-4.97
2.45
-
-
-
-
-
-8.62
-
-
95.03
50.00
Mineralfields/Energyfields Multi Series Fund Inc.
-
-
14.12
44.90
43.26
28.48
28.48
-
77.06
-29.39
-33.37
45.27
-
96.55
68.18
National Life Multi-Strategy Fund
Dir.
-
1.25
2.85
2.27
3.15
3.15
1.55
5.11
-2.15
-3.00
3.46
2.56
99.76
54.17
2.25
Northern Rivers Innovation Fund L.P.
Dir.
-
18.90
43.94
38.69
92.50
92.50
37.38
53.88
-11.19
-16.84
23.11
20.80
100.00
70.59
ONE Financial Guaranteed Absolute Return Notes
Dir.
-
-0.26
0.25
2.10
1.81
1.81
1.77
2.23
5.25
-5.88
-7.56
4.33
4.81
97.87
66.67
ONE Financial MSCI Hedge Invest Index Nts Series 1
Non-Dir.
-
-0.33
0.70
4.78
1.12
1.12
-1.88
-1.77
4.78
-8.58
-9.86
4.35
4.18
94.45
44.74
ONE Financial MSCI Hedge Invest Index Nts Series 2
-
-
0.38
2.19
3.76
-2.37
-2.37
-
-1.35
3.76
-5.90
-7.73
4.55
-
95.74
55.56
ONE Financial Step-Over Bonds Series 1
-
-
-0.91
1.75
9.92
6.04
6.04
-
-3.09
9.92
-9.30
-16.55
6.07
-
91.73
42.42
ONE Financial Step-Over Bonds Series 2
-
-
-3.23
-0.06
9.54
3.40
3.40
-
-2.19
11.77
-5.61
-13.64
8.92
-
94.60
40.00
ONE Financial Step-Over Bonds Series 3
-
-
-0.92
3.30
15.15
2.92
2.92
-
-3.20
15.15
-10.63
-18.85
10.06
-
93.45
44.00
ONE PLI G7 Global Index Note Series 1
-
-
3.32
7.85
11.31
2.21
-
-
-
-
-
-8.17
-
-
100.00
66.67
ONE PLI G7 Global Index Note Series 2
-
-
4.13
4.88
-
4.88
-
-
-
-
-
0.00
-
-
100.00
100.00
ONE PLI Gold Note Series 1
-
-
-0.06
1.71
1.64
-6.06
-
-
-
-
-
-9.60
-
-
93.94
33.33
ONE PLI Gold Note Series 2
-
-
-2.87
-1.86
-
-1.86
-
-
-
-
-
-2.87
-
-
97.13
66.67
ONE PLIC Canadian Dividend Note Series 1
-
-
-1.71
-8.69
0.12
-8.04
-
-
-
-
-
-9.58
-
-
91.31
55.56
ONE PLIC Global Dividend Note Series 1
-
-
1.97
4.94
10.55
5.86
-
-
-
-
-
-4.25
-
-
99.61
66.67
Palos Income Trust Fund L.P.
-
130.000
3.46
-7.64
-4.42
-1.22
-1.22
11.84
19.24
-9.44
-11.46
14.26
13.50
91.60
78.46
Pescara Fund of Funds
-
-
-6.66
-8.64
-15.10
-4.31
0.56
9.06
-15.10
-18.03
9.43
8.21
81.97
59.18
Pescara Fund of Funds U$
-
-
-9.10
-12.56
-18.74
-0.41
0.28
15.73
-18.74
-20.28
12.99
11.97
79.72
53.85
Picton Mahoney Long Short Equity Fund Class A
-
21.914
2.16
8.33
15.80
39.61
39.61
-
22.41
11.99
0.00
7.84
-
100.00
100.00
Picton Mahoney Long Short Equity Fund Class F
-
1.974
2.21
8.48
-
8.48
-
-
-
-
-
0.00
-
-
100.00
100.00
Picton Mahoney Market Neutral Equity Fund Class F
-
4.198
1.48
4.34
-
4.34
-
-
-
-
-
0.00
-
-
100.00
100.00
Pro-Hedge Capital Preservation Fund Class A
-
-
0.20
1.01
1.15
4.18
4.81
-
3.37
4.38
-0.96
-1.69
1.75
-
100.00
76.92
Pro-Hedge Capital Preservation Fund Class F
-
-
0.29
1.29
1.77
5.50
6.40
-
4.63
5.29
-0.51
-1.65
1.85
-
100.00
76.92
Pro-Hedge Capital Preservation PLUS Class A
-
-
0.03
0.83
-0.06
3.38
4.15
-
1.39
5.75
-1.73
-3.98
3.28
-
98.71
63.64
16
www. c a n a dia n hedgewat ch.com
H E D G E F U N D P E R F O R M A N C E (as of December 31, 2006)
Fund Name
Style
Asset
($MM)
1
month
3
month
6
month
YTD
1
year
3
year
ITD
Best 6mo.
(3 Year)
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
% Pos.
Month
Pro-Hedge Capital Preservation PLUS Class F
-
-
0.10
1.00
0.22
4.36
5.33
-
2.53
6.62
-1.30
-3.76
3.45
-
99.08
63.64
Pro-Hedge Capital Preservation USD Class A
-
-
0.20
0.99
1.16
4.18
4.18
-
4.18
2.99
0.55
-0.98
1.80
-
100.00
75.00
Pro-Hedge Elite Fund Class A
Dir.
-
1.26
4.73
3.70
7.10
7.10
6.36
6.36
14.89
-7.98
-7.98
10.61
8.59
96.38
55.56
Pro-Hedge Elite Fund Class F
Dir.
-
1.32
4.80
3.94
7.70
7.70
-
7.11
15.12
-7.58
-7.58
10.47
-
96.85
57.69
Pro-Hedge Protected Notes Series II
Non-Dir.
-
0.18
-0.43
3.00
-0.26
-0.26
-
-0.17
10.45
-4.47
-8.44
5.19
-
94.31
54.29
Pro-Hedge Protected Notes Series III
Non-Dir.
-
0.25
-0.42
2.85
-0.28
-0.28
-
1.16
10.33
-3.97
-8.20
5.36
-
94.42
56.25
Quadrexx CHEOPS Enriched Long-Short Fund
-
-
0.03
1.24
0.75
1.07
-
-
-
-
-
-0.62
-
-
100.00
80.00
Quadrexx Market Neutral Performance Fund Series A
-
-
0.41
0.22
-2.78
3.28
3.28
-
2.65
13.06
-7.74
-8.72
8.10
-
92.64
64.71
Quadrexx Market Neutral Performance Fund Series B
-
-
0.39
0.17
-2.88
2.73
2.73
-
1.88
11.99
-7.81
-8.77
7.95
-
92.55
64.71
Quadrexx Market Neutral Performance Fund Series F
-
-
0.49
0.47
-2.29
4.27
4.27
-
3.65
13.69
-7.21
-8.27
8.02
-
93.24
64.71
Redwood L/S Conservative Equity Fund
-
-
-0.11
-0.08
1.69
9.08
9.08
-
8.67
9.00
1.31
-0.70
3.48
-
99.78
78.57
Redwood Long/Short Fund
Enh. Eq.
-
2.05
6.61
-5.13
4.70
4.70
17.81
-21.00
-25.10
19.07
13.46
82.33
61.11
Robson Van Eck Hard Assets Fund A
-
-
1.95
2.42
4.50
6.39
-
-
-
-
-
-1.05
-
-
100.00
77.78
79.68
-3.50
-13.61
24.46
-
100.00
75.00
-
-
0.00
-
-
100.00
100.00
Salida Multi Strategy Hedge Fund
Dir.
108.000
2.00
21.43
22.86
87.41
87.41
-
Salida Multi Strategy Hedge Fund Class F
Dir.
108.000
2.05
13.31
-
13.31
-
-
-
SciVest Conservative Market Neutral Equity A2 C$
Non-Dir.
-
1.68
2.75
0.55
2.79
2.79
-
0.88
3.46
-1.57
-3.63
5.41
-
99.02
56.52
SciVest Conservative Market Neutral Equity A2 U$
Non-Dir.
-
-0.22
-1.49
-3.91
3.18
3.18
-
3.80
11.04
-4.23
-6.46
8.63
-
95.57
47.83
SciVest Conservative Market Neutral Equity F U$
-
-
0.88
-0.25
-2.36
5.44
5.44
5.16
5.42
12.73
-5.84
-8.54
8.62
9.41
97.18
57.89
SciVest Conservative Market Neutral Equity Fund
Non-Dir.
-
1.88
2.95
0.88
3.22
3.22
0.44
2.33
5.69
-6.94
-8.02
5.49
5.46
99.21
56.86
SciVest Conservative Market Neutral Equity Fund U$
Non-Dir.
-
0.53
-0.76
-3.07
4.18
4.18
3.95
9.67
12.06
-6.31
-8.92
8.62
9.39
96.40
64.71
SciVest Global Long-Short Equity Fund
-
-
5.36
7.00
2.92
6.68
6.68
-
6.58
11.36
-5.72
-7.08
10.20
-
99.43
62.86
SciVest Global Long-Short Equity Fund U$
-
-
3.40
2.59
-1.64
7.09
7.09
-
11.92
18.82
-5.71
-10.32
11.22
-
95.74
57.14
SciVest Market Neutral Equity Fund
Non-Dir.
-
4.67
6.39
3.28
5.86
5.86
-2.59
5.28
5.88
-10.96
-14.09
10.58
8.75
92.42
54.41
SciVest Market Neutral Equity Fund Class A2 C$
Non-Dir.
-
5.05
6.83
3.71
6.29
6.29
-
0.91
3.71
-5.40
-6.12
10.84
-
100.00
52.17
SciVest Market Neutral Equity Fund Class A2 U$
Non-Dir.
-
3.10
2.42
-0.88
6.70
6.70
-
3.84
8.01
-5.88
-5.94
12.40
-
97.82
52.17
SciVest Market Neutral Equity Fund U$
Non-Dir.
-
2.88
2.16
-1.14
6.44
6.44
0.92
5.95
12.38
-11.78
-14.64
12.24
11.63
97.59
60.00
SciVest Net Short Equity Fund
-
-
4.87
0.25
-3.05
2.36
2.36
-
0.66
8.25
-7.23
-8.37
9.20
-
96.09
50.00
SciVest Oil Sands Index PLUS Fund Class A U$
-
-
0.22
10.72
-14.29
-7.20
-
-
-
-
-
-24.22
-
-
83.91
50.00
SEI Futures Index Fund - F Class
-
0.017
0.86
0.33
-0.25
-2.17
-
-
-
-
-
-3.07
-
-
97.83
44.44
SEI Futures Index Fund - O Class
-
56.275
0.93
0.57
0.30
-1.31
-1.31
1.51
1.93
5.39
-6.75
-8.66
2.43
5.87
97.16
56.16
SEI Futures Index Fund - P Class
-
1.473
0.80
0.17
-0.49
-2.86
-2.86
-0.10
-0.10
4.56
-7.49
-9.26
2.43
5.86
93.01
48.65
Sextant Strategic Opportunities Hedge Fund
-
-
3.47
4.36
7.37
-
102.08
-13.06
-18.33
85.70
-
96.89
66.67
Sextant Strategic Opportunities Hedge Fund Ser F
-
-
3.39
3.77
7.05
-
113.26
-7.31
-18.36
85.94
-
97.24
66.67
SG-Campbell Notes Series 1
-
-
4.82
6.86
2.71
0.57
0.57
10.16
-9.03
-12.80
7.38
8.03
93.17
55.26
Skylon Global Resource Split Corp
-
27.500
-1.79
20.14
7.66
26.69
26.69
-
53.39
-7.96
-14.30
31.37
-
98.21
67.74
Sprott Bull/Bear RSP Fund
Enh. Eq.
69.258
-0.70
10.35
7.70
23.98
23.98
19.17
30.11
-7.44
-24.27
21.13
15.59
99.19
60.00
Sprott Hedge Fund L. P.
Enh. Eq.
500.408
-0.49
11.01
8.65
25.49
25.49
20.79
30.88
-7.10
-31.81
21.63
16.66
99.51
67.57
0.02
0.02
Sprott Hedge Fund L.P. II
Enh. Eq.
193.160
-0.68
10.81
8.01
21.94
21.94
18.41
27.22
-7.45
-31.98
20.85
15.66
99.32
60.38
Sprott Opportunities Hedge Fund LP
Enh. Eq.
297.513
3.42
3.17
2.59
14.44
14.44
-
8.88
46.19
-2.07
-3.39
10.05
-
99.91
72.73
Sprott Opportunities RSP Fund
-
52.792
3.45
3.18
2.57
14.30
14.30
-
20.93
-2.17
-3.42
10.11
-
99.92
56.25
Stanton Diversified Strat LP - Class A C$ 151
-
-
1.82
-6.11
-
-6.11
-
-
-
-
-9.42
-
-
92.23
75.00
-
TA3 - Campbell 'A' C$
Dir.
-
6.25
9.12
4.09
-0.36
-0.36
3.73
4.85
10.20
-10.98
-11.01
9.16
10.37
98.05
59.57
TA3 - Campbell 'F' C$
Dir.
-
6.35
9.45
4.74
0.89
0.89
5.07
6.75
10.88
-10.41
-10.54
9.16
10.37
98.98
54.76
TA3 - Hybrid 'A' C$
Dir.
-
3.34
5.48
3.55
3.58
3.58
4.77
4.95
5.18
-4.17
-7.99
4.27
4.77
100.00
60.78
TA3 - Hybrid 'F' C$
Dir.
-
3.42
5.74
4.07
4.62
4.62
6.04
6.14
5.70
-3.20
-3.20
4.27
4.69
100.00
66.67
TA3 - Hybrid No-Load C$
-
-
3.42
5.74
4.07
4.62
4.62
5.40
5.40
5.70
-3.20
-3.20
4.27
4.63
100.00
58.33
TA3 - Mesirow 'A' C$
Dir.
-
1.36
2.94
2.88
5.64
5.64
4.06
3.89
4.77
-0.47
-1.60
2.52
2.48
100.00
72.55
TA3 - Mesirow 'A' US$
Dir.
-
1.55
3.43
3.67
7.37
7.37
4.83
4.39
5.73
-0.67
-1.67
2.67
2.59
100.00
74.51
TA3 - Mesirow 'F' C$
Dir.
-
1.44
3.20
3.40
6.69
6.69
5.07
4.79
5.15
0.09
-9.87
2.52
2.47
100.00
76.47
TA3 - Mesirow 'F' US$
Dir.
-
1.63
3.69
4.19
8.44
8.44
5.74
5.01
6.12
-0.44
-1.50
2.66
2.59
100.00
78.43
TA3 - Mesirow 'FI' C$
Dir.
-
1.46
3.25
3.51
6.92
6.92
5.23
5.02
5.25
-0.07
-1.41
2.52
2.50
100.00
78.43
TA3 - Mesirow 'FI' US$
Dir.
-
1.65
3.74
4.30
8.67
8.67
6.16
5.58
6.18
-0.06
-1.46
2.66
2.59
100.00
78.43
w ww.ca nadi an h edgew a t c h .c om
17
H E D G E F U N D P E R F O R M A N C E (as of December 31, 2006)
Fund Name
Asset
($MM)
Style
1
month
3
month
6
month
YTD
1
year
3
year
Best 6mo.
(3 Year)
ITD
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
% Pos.
Month
TA3 - Mesirow 'O' C$
Dir.
-
1.51
3.40
3.81
7.55
7.55
5.67
4.41
5.47
0.10
-1.33
2.52
2.47
100.00
80.43
TA3 - Mesirow 'O' US$
-
-
1.70
3.89
4.61
9.31
9.31
5.84
4.55
6.43
-0.29
-1.37
2.66
2.57
100.00
84.78
TA3 - Safeguard C$
Dir.
-
1.29
2.75
2.49
4.85
4.85
3.48
3.27
4.78
-0.74
-1.76
2.52
2.53
100.00
68.63
TA3 - Safeguard US$
Dir.
-
1.48
3.24
3.28
6.57
6.57
3.66
3.26
4.43
-1.04
-2.59
2.67
2.84
100.00
66.67
The Friedberg Currency Fund
Dir.
8.222
8.65
14.41
-4.23
13.16
13.16
22.42
1.56
37.07
-10.34
-75.71
25.78
23.36
50.50
52.08
7.40
The Millennium BullionFund
-
-
-2.03
9.94
9.06
24.52
24.52
10.40
30.36
-13.39
-18.72
23.47
18.32
97.97
57.69
The Millennium BullionFund Class F
-
-
-1.93
10.12
9.55
25.63
25.63
-
30.87
-6.55
-9.46
23.11
-
98.07
62.96
The Millennium BullionFund Class F U$
-
-
-3.76
5.58
4.69
26.12
26.12
-
37.76
-6.90
-10.72
23.70
-
94.32
55.56
The Millennium BullionFund U$
-
-
-3.85
5.40
4.22
24.99
24.99
-
37.84
-7.49
-11.60
24.10
-
93.32
55.56
Tower Performance Fund Class A
-
-
14.83
-42.19
-53.48
-
-1.55
-58.87
-61.94
48.40
-
43.71
41.67
Tower Performance Fund Class F
-
-
14.94
-42.04
-52.42
Trans IMS Global Market Neutral Fund
Non-Dir.
12.923
1.45
4.12
4.00
Tremont Capital Opportunity Trust
Dir.
-
0.37
-1.09
Tremont Core Diversified Fund Class A
-
-
1.21
2.84
Tremont Core Diversified Fund Class F
-
-
1.30
Tremont Core Diversified Fund Class FI
-
-
1.33
-
-
-
-
-
-59.91
-
-
46.08
50.00
7.41
7.41
3.65
4.57
5.15
-2.12
-16.60
6.85
4.57
100.00
69.39
-5.83
-1.21
1.49
2.83
3.48
7.77
-5.83
-6.17
5.31
4.24
94.17
67.44
2.42
4.53
4.53
3.74
3.74
6.82
-2.90
-3.96
4.17
3.40
99.72
69.44
3.11
3.17
5.82
5.82
5.06
5.06
7.53
-2.28
-3.64
4.15
3.42
100.00
69.44
3.23
3.40
6.20
6.20
5.36
5.36
7.60
-2.10
-3.56
4.14
3.39
100.00
69.44
Tremont Core Diversified Fund Class I
-
-
1.24
2.92
2.64
4.80
4.80
4.11
4.11
6.91
-2.76
-3.90
4.16
3.40
99.91
69.44
Tremont Core Diversified Fund Class O
-
-
1.42
3.51
4.08
7.40
7.40
-
7.33
8.14
-1.49
-3.23
4.10
-
100.00
80.77
Tremont Core Diversified Fund Class USF
-
-
1.41
3.66
4.38
7.95
7.95
5.77
5.77
8.59
-1.83
-2.68
3.81
3.50
100.00
72.22
Tremont Core Diversified Fund Class USFI
-
-
0.66
3.37
3.79
6.94
6.94
5.36
5.36
8.12
-1.89
-2.62
3.89
3.51
100.00
72.22
Tremont Core Diversified Fund Class USI
-
-
2.04
3.63
4.43
8.10
8.10
5.54
5.54
8.70
-2.22
-2.90
3.96
3.57
100.00
66.67
Tremont Core Diversified Fund U$ Class A
-
-
1.32
3.37
3.69
6.69
6.69
4.49
4.49
7.98
-2.38
-3.11
3.82
3.47
100.00
66.67
Tremont Core Diversified Fund U$ Class O
-
Trident Global Opportunities Fund C$
Dir.
-
1.45
3.86
5.03
9.23
9.23
-
8.86
9.24
-0.20
-2.33
3.77
-
100.00
76.92
60.400
0.69
2.54
-4.67
0.05
0.05
2.26
2.76
15.38
-12.93
-12.98
15.33
11.14
89.23
49.30
Trident Global Opportunities Fund Class F C$
-
-
Trident Global Opportunities Fund U$
-
-
1.18
2.14
-4.78
0.47
0.47
3.79
3.70
14.45
-12.35
-12.56
14.75
10.74
89.31
57.75
-1.56
-2.36
-9.33
-0.89
-0.89
5.72
7.54
20.22
-12.88
-14.99
19.78
15.36
85.01
Vertex Fund
Non-Dir.
-
2.48
54.93
4.86
5.52
10.24
13.75
22.06
24.59
-6.72
-14.32
12.65
12.49
98.83
72.73
Vertex Fund Class B
-
-
2.50
4.70
5.10
9.39
12.81
21.16
24.09
-7.20
-9.18
12.71
12.50
98.32
73.68
Vertex Fund Class F
-
-
2.48
4.85
5.51
10.24
13.73
-
24.53
-6.71
-8.99
12.64
-
98.82
71.43
WAM Canadian Performance Fund
-
-
3.41
4.24
1.47
1.06
-
-
-
-
-
-3.52
-
-
100.00
50.00
Equally Weighted Average Performance of All Funds
-
5,314.153
1.44
3.67
1.97
7.05
8.65
7.01
-
-
-
-
-
-
-
-
Number of Funds in Sample
-
88
290
289
280
290
253
137
-
-
-
-
-
-
-
-
Best 6mo.
(3 Year)
Worst 6mo.
(3 Year)
Max.
Draw Down
Std. Dev.
(1 year)
Std. Dev.
(3 year)
% High
Watermark
MARKET INDICES
1
month
INDEX NAME
3
month
6
month
YTD
1
year
(as of December 31, 2006)
3
year
ITD
% Pos.
Month
183 Day Canada T-Bill
-
-
0.34
1.02
2.08
4.06
4.06
3.05
7.61
2.09
1.04
0.00
0.06
0.22
100.00
100.00
91 Day Canada T-Bill
-
-
0.34
1.02
2.07
3.98
3.98
2.96
6.97
2.07
1.01
0.00
0.08
0.23
100.00
100.00
BMO Canadian Small Cap Index
-
-
1.99
8.22
6.64
13.55
13.55
15.15
7.72
29.49
-10.38
-36.81
14.49
14.03
97.56
58.92
MS EAFE Free Index (C$)
-
-
5.24
15.11
19.86
27.12
27.12
16.21
6.92
19.86
-5.96
-46.77
10.91
9.63
100.00
58.08
MSCI World Index (C$)
-
-
4.13
13.10
18.43
20.90
20.90
11.20
11.58
18.43
-7.07
-44.31
9.79
8.91
95.19
63.26
Nasdaq Composite Index (C$)
-
-
1.34
11.51
16.10
9.75
9.75
2.72
9.87
16.10
-10.98
-72.68
14.45
13.56
41.34
58.47
S&P 500 Total Return Index C$
-
-
3.46
11.25
17.71
16.03
16.03
6.58
12.46
17.71
-8.60
-42.02
9.56
9.43
82.28
62.30
S&P/TSX 60 Total Return Index
-
-
1.65
10.87
14.74
19.16
19.16
19.66
10.72
18.06
-4.14
-47.89
10.32
10.15
100.00
63.83
S&P/TSX Composite Index
-
-
1.22
9.75
11.16
14.51
14.51
16.23
7.82
17.54
-4.68
-45.05
10.66
10.12
100.00
59.21
S&P/TSX CPD Income Trust Total Return
-
-
0.81
-5.59
-10.20
-2.84
-2.84
17.28
23.74
27.38
-11.05
-24.92
14.38
14.77
87.65
72.48
18
www. c a n a dia n hedgewat ch.com
Fewest Negative Months (3 Year)
Fund Name
Fewest Negative Months (1 Year)
# of
Negative
Months
Style
Ann. Return
Ann. Std.
Dev.
Fund Name
Style
# of
Negative
Months
Ann. Return
Ann. Std.
Dev.
7.84
Abria Diversified Arbitrage Trust Class P $CAD
-
5
2.57
5.13
Picton Mahoney L/S Equity Fund Class A
-
0
39.61
Lake Shore Financial Asset Account Inc U$
Dir.
6
17.75
7.14
Mackenzie Sentinel US Mgd Yield Cl. Ser B U$
-
0
4.46
0.30
TA3 - Mesirow 'O' US$
-
7
5.84
2.57
Abria Diversified Arbitrage Trust Class O $US
-
1
0.97
8.74
Palos Income Trust Fund L.P.
-
8
11.84
13.50
Mac Alternative Strategies Class F
-
8
7.17
4.03
Vertex Fund
Non-Dir.
10
22.06
12.49
Tremont Core Diversified Fund Class USF
-
10
5.77
3.50
Goodwood Fund Class A
Enh. Eq.
10
18.01
11.24
TA3 - Mesirow 'O' US$
-
2
9.31
2.66
Mac Alternative Strategies Class F
-
2
9.54
3.98
Lawrence Partners Fund LP
-
2
74.74
21.75
KCS Absolute Core Return Fund
-
2
15.10
9.80
BNP - Mesirow Notes Series 2
Non-Dir.
2
6.21
2.70
2.15
BNP - Mesirow Notes Series 2
Non-Dir.
10
3.71
2.61
Arrow Enhanced Income Fund Class F
-
2
5.86
Adaly Opportunity Fund Class A
Enh. Eq.
10
18.80
12.99
Amethyst Arbitrage Fund
-
2
10.92
6.10
Front Street Canadian Hedge Fund
Dir.
11
18.29
12.95
Tremont Core Diversified Fund U$ Class O
-
3
9.23
3.77
Dir.
11
13.80
10.27
Trans IMS Global Market Neutral Fund
Non-Dir.
3
7.41
6.85
Dynamic Alpha Performance Fund
Lowest Volatility (3 Year)
Fund Name
Lowest Volatility (1 Year)
Ann. Std.
Dev.
Style
# of
Ann. Return Negative
Months
Fund Name
Ann. Std.
Dev.
Style
# of
Ann. Return Negative
Months
TA3 - Mesirow 'O' C$
Dir.
2.47
5.67
9
Mackenzie Sentinel US Mgd Yield Cl Ser B U$
-
0.30
4.46
0
TA3 - Safeguard C$
Dir.
2.53
3.48
12
Pro-Hedge Capital Preservation Fund Class A
-
1.75
4.81
3
National Life Multi-Strategy Fund
Dir.
2.56
1.55
21
Arrow Enhanced Income Fund Class G U$
-
2.00
5.45
2
BNP - Mesirow Notes Series 2
Non-Dir.
2.61
3.71
10
Guaranteed Investment Solutions Series 2
-
2.13
1.76
4
6
IAP Multi-Strategy
-
3.13
1.55
19
SEI Futures Index Fund - O Class
-
2.43
-1.31
Tremont Core Diversified Fund Class FI
-
3.39
5.36
11
TA3 - Safeguard C$
Dir.
2.52
4.85
4
Mac Alternative Strategies
Dir.
3.78
5.63
11
TA3 - Mesirow 'O' C$
Dir.
2.52
7.55
2
ONE Financial MSCI Hedge Inv. Idx. Nts Ser.1
Non-Dir.
4.18
-1.88
21
BNP - Mesirow Notes Series 2
Non-Dir.
2.70
6.21
2
Tremont Capital Opportunity Trust
Dir.
4.24
2.83
14
BDC Managed Futures Notes Series N-3
Dir.
2.94
0.21
6
Horizons Mondiale Fund
Dir.
4.50
2.04
18
Arrow High Yield Fund
Dir.
3.24
8.11
3
Trans IMS Global Market Neutral Fund
Non-Dir.
4.57
3.65
13
National Life Multi-Strategy Fund
Dir.
3.46
3.15
6
TA3 - Hybrid No-Load C$
-
4.63
5.40
15
Redwood L/S Conservative Equity Fund
-
3.48
9.08
3
Highest Return (3 Year)
Fund Name
Style
Highest Return (1 Year)
Ann. Return
Dynamic Power Hedge Fund Class F
Dir.
54.74
Northern Rivers Innovation Fund L.P.
Dir.
37.38
DeltaOne Northern Rivers Fund L.P.
Enh. Eq.
35.71
Arrow Epic Capital Fund
Enh. Eq.
23.83
The Friedberg Currency Fund
Dir.
22.42
Vertex Fund
Non-Dir.
22.06
Epic Limited Partnership
Enh. Eq.
22.01
Sprott Hedge Fund L. P.
Enh. Eq.
20.79
FG Limited Partnership
-
19.20
Ann. Std.
Dev.
36.78
# of
Negative
Months
Fund Name
12
Sextant Strategic Opportunities HF Ser F
20.80
12
23.99
14
19.22
23.36
Style
Ann. Return
Ann. Std.
Dev.
# of
Negative
Months
-
116.87
85.94
4
DeltaOne Northern Rivers Fund L.P.
Enh. Eq.
102.33
28.73
3
Northern Rivers Innovation Fund L.P.
Dir.
92.50
23.11
3
15
Salida Multi Strategy Hedge Fund
Dir.
87.41
24.46
3
15
Lawrence Partners Fund LP
-
74.74
21.75
2
12.49
10
Dynamic Power Hedge Fund Class A
Dir.
72.56
40.76
5
16.74
14
Front Street Mining Opportunities Fund
-
56.84
27.21
4
16.66
15
Dynamic Power Emerg. Markets Fund Ser.F
-
53.20
23.44
3
11.98
14
Dynamic Contrarian Fund Series F
-
52.22
20.22
3
Sprott Bull/Bear RSP Fund
Enh. Eq.
19.17
15.59
16
Picton Mahoney L/S Eq. Fund ClassA
-
39.61
7.84
0
Arrow Goodwood Fund
Enh. Eq.
19.14
12.98
12
Asset Logics Special Situations Fund
-
35.80
22.43
5
Adaly Opportunity Fund Class A
Enh. Eq.
18.80
12.99
10
Arrow Epic Capital Fund Class F
Enh. Eq.
29.60
21.14
5
w ww.ca nadi an h edgew a t c h .c om
19
Hedge Funds 2006: The End of the Beginning
by Canadian Hedge Watch Staff
I
t could be argued that, speaking globally, hedge funds
became mainstream investments by the end of last
year. Their growth to nearly US$1.5 trillion puts them
well ahead of estimates made less than 2 years ago that
they would reach this point by 2010.
The growth in this sector in Canada has also increased but
in this country hedge funds are still a couple of years away
from achieving mainstream recognition. At the moment,
the Canadian hedge fund scene boasts a large number
of up-and-coming hedge funds in addition to a few large
ones.
During 2006, HFR reported the launch of 1,017 new hedge
funds and the liquidation of 450 meaning that the ratio of
new versus liquidated hedge funds was the smallest since
data gathered in 1996.
Although still relatively young, hedge funds are beginning
to age and 62% of them are now three or more years old.
30% of the world’s hedge funds still require a minimum
investment of US$1 million or more. The majority of hedge
funds (86%) now allow monthly subscriptions while a large
proportion of them (37.80%) have instituted quarterly
redemption policies.
An Overview of Global Hedge Funds in 2006
In the past year hedge funds have exhibited their largest
annual increase ever in assets under management (AUM).
Total global AUM in hedge funds now stands at US$1.427
trillion and it is likely to exceed US$1.5 trillion in the first
six months of 2007.
There are about 9,500 hedge funds in total with an
average AUM of about US$150 million each, a figure that
has remained relatively unchanged over the past couple
of years.
The fund of hedge funds remain the most prevalent hedge
fund type and accounts for 38.36% or US$547 billion
of global hedge fund assets. This is followed by equity
hedge funds which comprise US$409 billion or 28.67% of
the total assets invested in hedge funds.
In 2006, fund of hedge funds attracted nearly US$50
billion in assets while equity hedge funds attracted
almost US$40 billion.
Estimated Growth of Assets / Net Asset Flow Hedge Fund Industry 1990 – 2006
$1,500,000
$1,426,710
$1,400,000
$1,300,000
$1,200,000
$1,105,385
$1,100,000
Assets (In $MM)
$1,000,000
$972,608
$900,000
$820,009
$800,000
$700,000
$625,554
$600,000
$539,060
$490,580
$500,000
$456,430
$400,000
$367,560
$300,000
$374,770
$256,720
$185,750
$167,790 $167,360
$200,000
$95,720
$100,000
$38,910
$58,370
$8,463
$27,861
$91,431
$57,407
$36,918
$55,340
$14,698
$23,336
$4,406
$46,545
$99,436 $70,635
$73,585
$126,474
$46,907
$0
($1,141)
($100,000)
1990
1991
1992
1993
1994
1995
1996
1997
Estimated Assets
1998
1999
2000
2001
2002
2003
2004
2005
2006
Net Asset Flow
Cop right 2007 All rights reser ed
20
www. c a n a dia n hedgewat ch.com
Estimated Strategy Composition by Number of Funds
Q4 2006
Sector (Total)
6.82%
Relative Value Arbitrage
4.45%
Short Selling
0.49%
Convertible Arbitrage
1.71%
Distressed Securities
2.44%
Emerging Markets (Total)
4.68%
Regulation D 0.33%
Merger Arbitrage 1.97%
Market Timing 1.39%
Macro 3.40%
Equity Hedge
26.74%
Fund of Funds
23.47%
Equity Market Neutral
3.78%
FI: MBS 0.92%
FI: High Yield 1.24%
FI: Diversified 1.91%
FI: Convertible Bonds
0.22%
FI: Arbitrage
2.89%
Event-Driven
6.82%
Equity Non-Hedge
4.34%
Estimated Net Asset Flow by Strategy
2006
Assets (in $MM)
($20,000)
($10,000)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Convertible Arbitrage
Distressed Securities
Emerging Markets (Total)
Equity Hedge
Equity Market Neutral
Equity Non-Hedge
Event-Driven
Fixed Income: Arbitrage
FI: Convertible Bonds
Fixed Income: Diversified
Fixed Income: High Yield
Fixed Income: MBS
Macro
Market Timing
Merger Arb
Regulation D
Relative Value Arbitrage
Sector (Total)
Short Selling
FOF
Continued on page 22
w ww.ca nadi an h edgew a t c h .c om
21
Continued from page 21
In 2006 the fund-weighted composite HFRI Index rose
12.9% vs. an increase of 15.8% for the S&P500. Emerging
Markets boasted the highest returns with a 24.3% advance
during 2006 while the one with the lowest was the “Short”
with a loss of 1.5%.
HFRI Index Performance
5 Year Annualized 2002 – 2006
25%
20.8%
20%
15.2%
ROR %
15%
12.6%
11.3%
10.6%
9.6%
10%
9.6%
7.4%
9.6%
9.4%
8.9%
8.8%
7.8%
7.6%
7.0%
7.8%
7.4%
6.4%
6.0%
6.2%
5.6%
4.2%
5%
Lehman Gov/Credit
S&P 500
Fund of Funds Comp
Short Selling
Sector
Relative Value Arb
Regulation D
Mkt Timing
Merger Arb
Macro
FI: Mortgage-Backed
FI: High Yield
FI: Diversified
FI: Convert Bonds
FI: Arb
Fund Weighted Comp. Index
Copyright 2007. All rights reserved.
www.hedgefundresearch.com
Event Driven
Equity Non-Hedge
Equity Market Neutral
Equity Hedge
Distressed
Convert Arb
Emerging Mkts
0.5%
0%
HFRI Index Standard Deviation
5 Year Annualized 2002 – 2006
14%
12.4%
12%
10.7%
10.8%
10.0%
10%
8.7%
STD %
8.1%
8%
6.7%
6.6%
6.1%
5.7%
6%
5.2%
5.0%
4.7%
4.3%
3.4%
3.2%
2.7%
2.0%
1.8%
2%
Lehman Gov/Credit
S&P 500
Fund of Funds Comp
Short Selling
Sector
Relative Value Arb
Regulation D
Mkt Timing
Merger Arb
Macro
FI: Mortgage-Backed
FI: Diversified
FI: Convert Bonds
FI: Arb
Event Driven
Fund Weighted Comp. Index
Copyright 2007. All rights reserved.
www hedgefundresearch com
Equity Non-Hedge
Equity Market Neutral
Equity Hedge
Distressed
Convert Arb
Emerging Mkts
1.4%
0%
22
3.6%
3.3%
2.9%
FI: High Yield
4%
www. c a n a dia n hedgewat ch.com
According to HFR, during the last 5 years ending December
2006, hedge funds returned an average of 9.6% as
measured by the HFRI Fund weighted composite index
vs. the S&P500’s 6.2%. Risk, as measured by standard
deviation, was a lot lower for hedge funds which showed
a 4.7% annualized standard deviation vs. the S&P500’s
12.4% in the same 5 year period. The Sharpe ratio for
hedge funds during this time was 1.46 while Sharpe ratios
were 0.35 and 0.63 respectively for the S&P500 and the
Lehmann Gov./Credit indices.
An Overview of Canadian Hedge Funds in 2006
This has been a year of steady increases in the number
of hedge funds in Canada in the wake of the problems
created by Portus and Norshield in 2005. CHW now
estimates the total assets of Canadian hedge funds to
be about $33 billion: $21 billion in retail and $12 billion in
institutional investments.
There are approximately 550 Canadian hedge funds to
date, though many of these are products of the same
companies issuing different classes of funds. About 300 of
these report their data and make it publicly available. The
average reporting Canadian hedge fund has assets under
management of approximately $55 million. Distribution of
assets is still heavily concentrated in the smaller funds,
those with AUM of less than $50 million.
Canadian hedge funds had a positive year in 2006 although
their returns were on average lower than those of the
S&P/TSX. This is largely attributable to the relatively large
number of principal protected note types of hedge funds
whose results were, generally speaking, disappointing.
RETURN
Equally
Weighted
Average
Canadian
HF Return
25
20
Frequency
10
3.46%
4.13%
1.43%
3 month
2.74%
11.16%
17.71%
18.43%
6.53%
6 month
1.20%
6.59%
10.87%
12.81%
6.61%
YTD
7.01%
14.52%
16.04%
20.90%
13.01%
1 year
7.01%
14.52%
16.04%
20.90%
13.01%
3 year *
7.61%
16.23%
6.58%
11.20%
10.43%
5 year *
8.05%
10.92%
-0.24%
3.79%
9.67%
S&P/TSX
Composite
Index
S&P 500
Total
Return
Index C$
MSCI World
Index (C$)
HFRI Fund
Weighted
Composite
Index
* annualized
Since
December,
1994
11.71%
9.47%
10.03%
7.84%
12.02%
Annualized
Standard
Deviation:
7.85%
15.56%
13.65%
12.46%
7.02%
0.98
0.35
0.44
0.31
1.14
% Positive
Months:
64.38%
62.33%
62.33%
60.14%
71.23%
% Positive
Quarters:
75.51%
71.43%
73.47%
71.43%
77.55%
1.84
1.54
2.33
1.69
5.53
Skewness:
53.07%
-95.73%
-43.55%
-39.33%
-52.91%
Kurtosis:
192.5%
296.24%
13.11%
-3.21%
325.70%
-11.69%
-45.05%
-42.03%
-44.31%
-11.42%
0.150
-
0.546
0.562
0.375
6.89%
-
3.04%
0.76%
5.97%
Alpha
(S&P/TSX):
0
100
200
300
400
500
600
Equally
Weighted
Average
Canadian
HF Return
Annualized
Return:
Beta (S&P/TSX):
0
HFRI Fund
Weighted
Composite
Index
1.22%
Largest
Drawdown:
5
MSCI World
Index (C$)
1.41%
Sortino Ratio:
15
S&P 500
Total Return
Index C$
1 month
Sharpe Ratio
(4%):
Distribution of Canadian Hedge Funds by Asset Size
S&P/TSX
Composite
Index
700
Asset Size ($MM)
The best return for a Canadian hedge fund was 116.87% in
2006 and 36.78% over the past three years (annualized).
The most favoured type of hedge fund in 2006 was the
equity long-short due to the decline in performance of, and
demand for, structured types such as principal protected
notes.
Provincial regulators and the federal government continue
their discussions regarding the management, sales and
reporting of hedge funds and further changes in regulation
are expected to be announced during 2007.
w ww.ca nadi an h edgew a t c h .c om
Canadian Hedge Watch Staff
Data and charts in this article are reproduced from HFRI
and Canadian Hedge Watch Quarterly Hedge Fund
Report, December, 2006.
23
Hedge Fund Snapshot
Picton Mahoney Long Short Equity Fund Class A
Terms and Conditions: (As of December 31, 2006)
Inception:
Style:
Management Fee:
Performance Fee:
RRSP Eligible:
Fund Sponsor Company:
December 30, 2005
Cdn. Long/Short Equity
2.00%
20.00%
Yes
Minimum Investment:
NAVPS:
Fund Assets (MM):
Website:
Evaluation:
$150k/$25k(accredited)
$13.86
$21.914
www.pictonmahoney.com
weekly
Picton Mahoney Asset Management
Tel:
416.955.4108
Fax:
1.866.877.9477
Toll Free:
1.866.369.4108
Picton Mahoney Long Short Equity Fund Class A
Year
2006
Jan
1.27%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
8.70%
4.54%
2.90%
0.70%
1.10%
2.82%
1.93%
1.99%
4.86%
1.13%
2.16%
1 yr
Inception
YTD
39.61%
Picton Mahoney Long Short Equity Fund Class A
10%
Annualized Return:
39.61%
39.61%
Ann. Std. Deviation:
7.84%
7.84%
8%
Sharpe Ratio (4%)
4.541
4.541
7%
Correlation to S&P/TSX
-0.03
-0.03
6%
100.00%
100.00%
5%
% of Positive Months
9%
4%
Exposures
Foreign Exposure
Dec-06
Nov-06
Oct-06
Sep-06
50.51%
# of Holdings
Aug-06
Net
Jul-06
0%
Jun-06
171.76%
May-06
1%
Gross
Apr-06
-60.62%
Mar-06
2%
Short
Jan-06
111.14%
Feb-06
3%
Long
129
0.00%
Objective
To provide consistent long-term capital
appreciation with an attractive risk
adjusted rate of return.
Based on current market conditions, the
Fund's target return is approximately 15%
per annum with similar volatility to the
S&P/TSX Index but with less correlation
to the overall equity market than a
traditional long only portfolio.
Performance Comparison
150%
Picton Mahoney Long Short Equity Fund Class A
S&P/TSX Composite Index
140%
130%
120%
110%
Dec-06
Sep-06
20
15
10
5
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
Jul-06
Jun-06
May-06
Apr-06
Mar-06
Feb-06
Jan-06
0
Dec-05
Mr. Picton is a graduate of the University
of British Columbia with a Bachelor of
Commerce Honours degree. He also
received a Leslie Wong Fellowship from
UBC's prestigious Portfolio Management
Foundation.
Fund Assets
25
Fund Assets ($MM)
Mr. Picton has managed portfolios for
Synergy Asset Mgnt since 1997, including
the Synergy Canadian Class.
Jun-06
Dec-05
Portfolio Manager:
David Picton
David Picton, President of Picton
Mahoney, has 17 years of investment
experience, including eight years as a topranked analyst and head of quantitative
research at RBC Dominion Securities.
Mar-06
100%
Continued on page 26
24
www. c a n a dia n hedgewat ch.com
A Commentary on the Dialogue with the OSC
by Basil D’Souza
In November, Ontario Securities Commision Chair, David
Wilson gave a speech at the Dialogue with the OSC. This
was an opportunity for the public and financial participants
to hear what the OSC has been working on and ask
questions relevant to their needs. In his speech, Wilson
discussed the need for reform of the Canadian regulatory
approach and structure, the regulation of hedge funds, a
commitment to retail investors and effective enforcement
to fight economic crime. Though not all of his presentation
was directed at the hedge fund industry, he did discuss
a number of critical points that affect this investment universe.
In his opening remarks, Mr Wilson mentioned the muchbelaboured need for a single national regulatory body.
He pointed out that this issue should now fall to the politicians to debate and resolve, however he did have some
helpful advice on the way in which such a body should be
designed.
Mr. Wilson outlined the structure and reform needed within
the Canadian market. He stressed the importance of this
decision in relation to Canada’s ability to compete. In particular, he discussed two pieces of research: the Crawford
report and the Allan report, both of which favour a principle-based regime over a prescriptive, rule-based regime.
In a prescriptive rule approach, a clear set of rules is set
forth which would lead to a defined course of action but
it is felt that this approach could give rise to complex and
exhaustive regulation. A principle-based regime allows
for flexibility to navigate a changing market environment
with the principles becoming evolving standards that can
adjust to changing needs. In Wilson’s assessment, the
current regime is a hybrid of both approaches with jurisdictions differing as to the degree to which each approach
is used.
On a side point, AIMA has also been discussing the need
for regulatory bodies to use a principle-based approach.
In Canada particularly, where the hedge fund industry
competes for assets through merit by high minimums and
sophisticated investor rules, a move to principle-based
disclosure would be a welcome change as it would put
the decision-making process in the hands of investors who
are best able to determine their own risk objectives.
The principle-based model does allow for a grey zone and
Mr. Wilson pointed out that strong enforcement of, and
compliance with, this type of regime would be required in
order to ensure that practices are kept within the spirit of
w ww.ca nadi an h edgew a t c h .c om
the regulation. As a conclusion on this topic, Mr. Wilson
discussed the need for a single regulatory body to administer the principle-based approach as the current 13 jurisdictions would each have its own interpretation and thus
create a cumbersome regulatory environment.
The OSC on Hedge Funds
Mr. Wilson reviewed his discussion with the Senate on
the status of regulation of hedge funds. He pointed out
that fund managers and people involved in distribution
of hedge funds in Canada must be registered; a significant difference to the US market. He discussed the new
proposal for the registration of those dealing with the
day-to-day operations of the hedge funds. Moreover, he
mentioned that the CSA has been on top of this growing asset class and will be serving notice in the next few
months. Unfortunately, he stopped short of hinting at any
definite changes.
OSC on Fairness to Retail Investors
Mr. Wilson had more to say about what he termed the
evolution of the OSC’s relationship with retail investors.
He affirmed that it was a priority for the OSC to ensure that
retail investors get a fair deal and he cited three demographic and economic developments that magnify the
importance of providing protection to retail investors:
1) the retirement of baby boomers
2) the inter-generational transfer of wealth
3) the move from defined benefit retirement plans to
defined contribution plans.
In his estimate, Canadians are ever more responsible for
the investment decisions necessary to ensure their retirement needs are met.
The OSC has been using a two-pronged approach by
working with the newly established Investor Advisory
Committee and the IDA, the MFDA and the Ombudsman
for Banking Services and Investments. A report from the
Investor Advisory Committee will be forthcoming in early
2007. With the IDA, MFDA and Ombudsman, there is collective work on improving the complaint-handling process,
enhanced communication, improved information access,
and providing clarity of existing redress mechanisms.
The initial work regarding fairness to retail investors flowed
from the first Investor Town Hall that took place in 2006.
Another Town Hall is scheduled for September 2007.
In regards to hedge funds, the OSC will be regulating custodial relationships but an understanding of how investors
Continued on page 26
25
Continued from page 25
may be impacted in terms of the hedge fund industry was
left out. In my opinion, the high minimums are an archaic
method of regulation. A regime based on the principle of
disclosure rather than merit allows investors to decide
what is in their best interests. Does an investor with $1
million in assets have a better understanding of the complexities of a particular investment than one with a quarter
million?
Furthermore, as mentioned in the principle approach portion of Mr. Wilson’s speech, I feel that the high minimums
stifle the competition which is at the heart of every free
market society. Through competition we weed out poor
performance and increase efficiencies by developing new
talent, reducing fees and increasing choice. By allowing
competition here in Canada, we enhance our ability to
compete globally and provide investors with the ability to
choose among the available options. Investors therefore,
gain equity through competition and choice.
Enforcement
Mr. Wilson listed effective enforcement as the OSC’s biggest challenge. Without proper enforcement, the very best
policies and regulations in the world do not mean a lot.
He pointed out that economic crime affects everyone from
investors to trust in the financial markets. He likened the
miss-statement of financial results to the crime of breaking and entering and further stated that economic crime
increases the costs of raising capital and maintaining a
robust economy.
Canadian Hedge Watch
is published 6 times per year by
Canadian Hedge Watch Inc.
We welcome articles, suggestions and comments
from our readers. All submissions become the property of Canadian Hedge Watch Inc., which reserves
the right to exercise editorial control in accordance
with its policies and educational goals.
CONTACT INFORMATION
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26
A movement for change is underway. Mr. Wilson mentioned a meeting in Newfoundland with federal and provincial Justice Ministers who recognized the importance
of policing fraud in Canada’s capital markets and the need
to apply sanctions. He discussed the establishment of a
working group to review ways to improve enforcement that
would include police, securities regulators and prosecutors.
In relation to the hedge fund industry, I believe that the
same is true. Examples such as the Portus failure are
cases that affect every market participant because they
reduce investor confidence in the capital markets. The
issue is not just a hedge fund one but also a problem for
which every financial professional should feel some measure of responsibility.
In conclusion, I believe that Mr. Wilson’s opening remarks
at the Dialogue for the OSC offered some understanding
of a move in the right direction for the regulatory environment in Canada. Although much work is still to be done,
we require the help of politicians to move forward as a unified body. With regard to the hedge fund industry, we will
have to await the notice due in early 2007.
Basil D’Souza is Vice President of Sales with
Quadrexx Asset Management. He has over 8 years
of industry experience, and a B. Comm with a major
in Finance from Concordia University. He is a CFA
Charter Holder.
Subscriptions:
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The information contained in Canadian Hedge Watch has been
carefully compiled from sources believed to be reliable, but its
accuracy is not guaranteed. The articles in this newsletter are
provided as a general source of information and should not
be considered personal investment advice. Before taking any
action you are cautioned to consult with your financial advisor. We have endeavored to ensure that the material contained in the newsletter is accurate at the time of publication.
Copyright© 2002-2007 Canadian Hedge Watch. Reproduction in
whole or in part without written permission is strictly prohibited.
Opinions expressed are not necessarily those of the
publishers. Management and shareholders of Canadian Hedge
Watch, editors and contributors may at times have positions in
mentioned securities.
www. c a n a dia n hedgewat ch.com
Around the Hedge – A Review of Hedge Fund Happenings
Canadian Managers Will Need to Register
Date: Monday, January 15, 2007
Author: Bill McIntosh, Hedgeworld.com
TORONTO (HedgeWorld.com)—Hedge fund managers in Canada are
to be subject to new requirements to register with provincial securities
commissions, according to statements from the Canadian Securities
Commission (CSA), the umbrella group for the commissions.
Currently, individuals who manage specific investment portfolios must
be registered, but the executives who set up and operate the fund
management companies are not covered by registration rules. The new
rules will also have executives of the fund management companies
meet certain standards regarding competence, integrity, financial
backing and ability to manage conflicts of interest.
“Regulators in Canada recognize the increased popularity of hedge
funds among retail investors,” said Jean St-Gelais, chair of the CSA
and president & CEO of the Autorité des Marchés Financiers, the
Québec regulator, in a statement on the CSA’s web site. “While we
feel the necessary regulatory framework is in place, it is important
to continually examine the framework against new products in our
evolving markets.”
The move comes after a two year review of hedge fund regulations. The
process featured a combination of compliance reviews of fund managers
and advisors, disclosure reviews and industry consultations.
Assets under management in Canadian hedge funds have grown
rapidly from a small base to about C$30 billion ($26 billion). The sector
looks poised to grow much further since the investment threshold is only
C$150,000 – a fraction of the $2.5 million threshold being proposed in
the United States by the Securities & Exchange Commission.
The areas identified for improvement by the Canadian regulators include
issues with principal protected notes (PPNs), referral arrangements,
distribution, disclosure and registration of fund managers. A CSA notice
sets out the regulators’ views on how these areas will be monitored or
their workings improved.
The review covered 37 hedge funds with a total value of C$1.25 billion
and 9 PPNs with a value of C$1.4 billion. Market participants were
chosen based on their size, the number and types of products offered
spanning hedge funds, funds of hedge funds and PPNs.
The notice cited problems with the way performance returns are
presented, and with a lack of clarity about how much investors are
paying in fees when they buy hedge fund products. The notice also
included advice to fund managers about proper disclosure practices.
Canadian regulators have raised concerns about PPNs since 2005,
but have yet to address the lack of regulatory oversight. Part of the
problem, officials say, is that PPNs are considered bank products,
rather than securities, and therefore fall under federal regulation.
Regulations about PPNs are expected within the next three months.
The matter of referral rules is also under scrutiny. New referral rules to
protect investors are expected to be included in a detailed registration
reform proposal to be released by the end of February.
BMcIntosh@HedgeWorld.com
Arrow offers stand-alone Canadian Income Fund
Date: Tuesday, January 30, 2007
Author: Investment Executive Staff
Arrow Hedge Partners Inc. today announced the launch of Arrow
Canadian Income Fund. The fund will invest primarily in Canadian
income trusts and dividend-paying common shares, with a focus on
North American securities.
The fund’s investment objective is to achieve a high level of income
and potential capital gains, generating an attractive risk-adjusted return
with moderate volatility. The fund, advised by Ben Cheng of Aston Hill
w ww.ca nadi an h edgew a t c h .c om
Financial Ltd., a wholly owned subsidiary of Overlord Financial Inc., will
be available for purchase by accredited investors on February 1.
“With the recent changes to the income trust legislation introduced by
the Canadian government, we believe this is an ideal time to start a
long/short fund that can take advantage of the considerable market
opportunities created,” says Mark Purdy, managing director and chief
investment officer of Arrow Hedge Partners.
“We are very excited to be working with Ben Cheng again,” says
James McGovern, CEO of Arrow Hedge Partners Inc. “The fund offers
investors an opportunity for a high level of income and potential capital
gains within a hedged investment process.”
Aston Hill’s “bottom up” research approach concentrates on companies
that operate in defensible niche markets and that have strong cash flow
and compelling growth prospects. Arrow Canadian Income Fund will
generally maintain a long bias, conducting a bottom-up analysis of each
security it owns, long or short.
“The securities selected for Arrow Canadian Income Fund will go
through a rigorous analytical process, with a focus on free cash flow,”
says Ben Cheng, portfolio manager and advisor to the fund.
BluMont calls special meeting to consider share
acquisition proposed by IAM
Date: Tuesday, January 23, 2007
Author: Investment Executive Staff
BluMont Capital Inc. today announced that Integrated Asset Management
Corp. (IAM), BluMont’s principal shareholder, has requested that
BluMont seek shareholder approval for IAM to acquire all of the BluMont
common shares that it does not currently own, directly or indirectly.
BluMont is a provider of alternative investment products with
approximately $790 million in assets under management.
BluMont is 60.6% owned by IAM, an alternative asset investment
management company with approximately $3 billion in assets and
committed capital under management. This proposal will be considered
at BluMont’s annual and special meeting of shareholders scheduled for
February 28.
In connection with IAM’s proposal, Stephen Kangas has tendered
his resignation as president and CEO of BluMont, to be effective
immediately following the meeting, Kangas will continue to serve as
president, CEO and a director of BluMont until the meeting.
In advance of the meeting, to ensure BluMont remains in compliance
with applicable corporate law regarding board composition, BluMont
announced that effective on January 19, Veronika Hirsch and Stephen
Johnson have both resigned as directors of BluMont and Thomas
Simpson has resigned as chairman of BluMont. Following these
resignations, the board of directors consists of Simpson, Stephen
Kangas and Victor Koloshuk. Koloshuk has been appointed chairman
of BluMont. IAM’s proposal follows its previously announced intention
to acquire the remaining BluMont common shares that it did not already
own. IAM currently owns, directly or indirectly, 20,509,274 BluMont
common shares or approximately 60.6% of the outstanding BluMont
common shares.
Pursuant to its formal exchange offer for any and all of the issued
and outstanding common shares of BluMont that IAM did not already
own, which expired on Nov. 10, 2006, IAM acquired an aggregate of
5,075,941 BluMont common shares on the basis of 1/3 of one IAM
common share for each BluMont common share tendered.
After considering the amalgamation proposed by IAM, the voting
members of the board of directors of BluMont have determined to
make no recommendation to BluMont shareholders with respect to the
proposed amalgamation.
Continued on page 28
27
Continued from page 27
BluMont’ board strongly urges shareholders to carefully review the
management information circular to be used in connection with the
meeting, which is expected to be mailed on or about January 26, and to
consider seeking advice from their financial, tax and other professional
advisors and then reach their own conclusion as to whether to vote for
or against the amalgamation proposed by IAM.
Under the terms of the proposed amalgamation, BluMont shareholders
would receive approximately 0.357 of an IAM common share for each
BluMont common share, or one IAM common share for every 2.8
BluMont common shares held.
In order to become effective, the proposed amalgamation will require,
among other things, approval by at least 66 2/3% of the votes cast by
BluMont shareholders and the approval of a majority of the votes cast
by “minority” holders of BluMont common shares at the meeting.
The BluMont shares owned by IAM prior to the offer will be excluded
from the minority for these purposes, but the shares acquired by IAM
under the offer are expected to be eligible to be counted towards the
requisite minority approval. IAM has advised BluMont that it will cause
all BluMont common shares owned directly or indirectly by it to be
voted in favour of the proposed amalgamation and will not exercise
dissent rights with respect to such shares. In addition, IAM has
advised BluMont that it has entered into support agreements with two
BluMont shareholders who own, directly or indirectly, approximately
1.925 million BluMont common shares and that, under the terms of
such agreements, each of the shareholders has agreed to vote or to
cause to be voted all of the BluMont common shares owned by such
shareholder in favour of the proposed amalgamation, subject to certain
terms and conditions.
Subject to receipt of all necessary regulatory approvals, and conditional
upon the completion of the amalgamation, IAM has advised BluMont
that it intends to supplement the consideration paid to those persons
that tendered to, and had their shares taken up by IAM under the offer,
by either, at the option of IAM, (a) issuing an additional approximately
0.024 IAM common shares for each BluMont common share tendered
(the Supplemental Consideration) such that those persons will in total
receive one IAM common share for every 2.8 BluMont common shares
already tendered, or (b) paying to such persons in cash the cash
equivalent of the Supplementary Consideration.
IAM has advised that it anticipates that, if approved, the proposed
amalgamation would be completed on or before March 9. Completion
of the proposed amalgamation is subject to certain conditions and there
can be no assurances that the amalgamation will be completed on the
basis proposed, or at all.
RBC Capital Markets Hires Bugler From Scotiabank
Date: Monday, January 22, 2007
Author: Doug Alexander, Bloomberg.com
(Bloomberg) -- RBC Capital Markets, the investment- banking unit of
Canada’s biggest lender, hired Colin Bugler from Bank of Nova Scotia
to expand its prime brokerage service for hedge funds.
Bugler, who has experience in international prime brokerage and equity
finance with Merrill Lynch & Co. and Bank of Nova Scotia, will be a
managing director of equity finance at RBC Capital, the Toronto-based
bank said today in a statement. RBC Capital is a unit of Royal Bank
of Canada.
Bulger, 43, was hired to build business from international hedge funds
that have Canadian interests, and expand the bank’s prime brokerage
unit in Canada, RBC Capital said. He’ll be based in Toronto.
RBC Capital Markets employs almost 3,700 people and has offices in
15 countries.
28
Amaranth Founder Explores New Firm
Date: Monday, January 8, 2007
Author: HFN Daily Report
After losing billions of dollars of investors’ money, Amaranth founder
Nick Maounis is trying to start a new firm.
According to a report in The Wall Street Journal, Maounis is teaming
up with former colleagues to start a money management business. The
firm will either manage money directly or help advise other funds.
Maounis is currently focused on winding down operations at Amaranth,
which should be completed by the end of March. The fund was forced
to close after losing billions of dollars in the course of about a week last
September through a series of bad bets on the price of natural gas.
According to the Journal, Maounis has actually been expressing pride
in Amaranth’s risk management, even though the drop in gas prices
that caused its demise had been foreseen by plenty of other players in
the market who profited from Amaranth’s fall.
The Securities and Exchange Commission, Commodities Futures
Trading Commission and Federal Energy Regulatory Commission have
all been investigating Amaranth, but it is unclear if any of them will be
taking regulatory action.
Despite the infamy of Amaranth’s woes, its former employees seem
to be having little trouble finding new jobs. Last month, Lehman Bros.
hired former Amaranth trader James Scully as senior vice president
for its prime services business and the Carlyle Group hired three
Amaranth pros to join its new hedge fund unit, Blue Wave. Moore
Capital Management opened an entire Canadian office with traders
from Amaranth.
It was Canadian trader Brian Hunter who placed the wrong-way bet
on natural gas that brought about the demise of the firm. Hunter
has apparently not found a new job yet, but he might not need one.
Amaranth reported paid the star trader $100 million the year before he
wrecked the firm.
Front Street Announces Reopening of Special
Opportunities Canadian Fund Ltd.
Date: Wednesday, December 20, 2006
Author: CCNMatthews
TORONTO, ONTARIO--(CCNMatthews - Dec. 20, 2006) - Front Street
Capital (Front Street) announced today that it will reopen the Front
Street Special Opportunities Canadian Fund Ltd. (the Fund) to new
purchases effective January 2, 2007.
The reopening will apply to Series A, B and F shares of the
Fund. Purchases made through an investor’s existing pre-authorized
purchase plan will continue to be unaffected. Front Street closed the
Fund to new purchases effective March 31, 2006 as a result of the
Fund having reached its capacity in terms of the amount of money
that could be effectively managed while still adhering to the Fund’s
investment objectives and strategies.
Front Street Capital was founded in 1996, creating a focused and
dedicated alternative asset class management firm. Based in Toronto,
Front Street Capital currently manages a total of approximately CDN
$2.5 billion in assets between their various sector and strategy specific
funds. With SEC registration and full compliance with regulatory
guidelines, Front Street Capital strives to achieve maximum returns
while reducing overall investment risk.
www. c a n a dia n hedgewat ch.com