How did Canadian hedge funds perform during the market crash that occurred in March?
Wide is the gate that leads to death, and wide is the way that leads to death. -Bruce Lee
Here are some updates on the performance of some important funds. Keep in mind that talking about short-term performance is just for fun.
Also, I don’t think a fund that drops 30% or more isn’t good enough. In fact, I expect some of my favorite managers to go through similar situations from time to time. It just needs to be right for the upside. Also, don’t forget that this blog is mostly about Canada. And the title is a bit of an exaggeration; I don’t think that all of the funds listed here are doomed to fail.
The “fund” with the best “outperformance” is the LSQ fund, which is run by Spartan Fund Management. Spartan manages a stable of funds. It’s kind of like an incubator or a grouping of funds that are run by different PMs with different levels of independence. In the case of LSQ, it is “run” by Todd Heaps, who used to be a prop trader and now works for Spartan.
So LSQ was “up” by 21.46 % in March and is “up” by 27 % so far this year. It went “up” 32% in 2017, and it went “up” 100% in 2018. Those are some really amazing “numbers.” I put these very high numbers in quotation marks because I haven’t been able to check them directly, so I have to be careful not to make a fool of myself. LSQ says that it uses a quantitative long/short strategy in North American equities.
The fund is no longer accepting new investors at this time. Some people are saying hurtful things about LSQ, but I don’t know very much about it.
In order to stay within Spartan, they support an arbitrage fund that is run by MMCAP. MMCAP has been around for a long time. It is run by two managers who started out on their own with $1 million from, I think, Arrow Capital. Over the years, they’ve had good numbers, even if they were sometimes unstable. They have used more and more creative ways to trade that might not be called arbitrage.
In March, that fund was down 26%. I’m not interested in event-driven or similar things, but these numbers probably don’t go against what you would expect from the strategy’s parameters. In 2008, MMCAP went through a similar drop, but it came back strong.
Let me finish by saying that Gary Ostoich, the former president of legendary (in a bad way) Salida Capital, is in charge of Spartan. Some Spartan funds seem to be managed by Spartan itself. Not the best way to do things.
In March, Venator’s Founders Fund lost 18.8% and is now growing at a rate of 8.3% since it started in 2006. Here’s an obscure reference to Venator: Avner Mandelman is very active on YouTube and Twitter:
He came up with the word “sleuth” and helped Venator for a short time. He only has 28 people who follow him on YouTube, and his videos don’t get many views. Someone, can you help?
The FANG-heavy hedge fund Barrage Capital, which has a 20% performance fee, was only down 2.81 percent. Waratah Performance, which I correctly guessed was a less bad hedge fund, may have gone up a little bit for the month.
Some of my less smart readers don’t seem to have known that hedge funds might do better in bear markets (you know who you are). Even though ships in port are safe, that’s not what they were made to do. Barrage, on the other hand, I mostly wish they would get rid of the performance fee and set stricter limits on the amount of alcohol they can serve.
The Acorn fund of Jason Russell is now kept at a place called ReSolve. It’s a CTA, which, in theory, should benefit from volatility or trends or something else I can’t remember. In real life, it’s 25% less.
Donville Kent’s interest rate has been 3% for the last five years, and that’s before March. I see that Jordan Zinberg, who used to be his partner, is no longer there. Sad!
Roundtable Capital and Barometer Capital joined forces in March. Jim Allan, who is married to a Basset, the family that runs CTV, started Roundtable many years ago. The fund began with $50 million, but I don’t think it did well. And at the end of last year, VertexOne of Vancouver, which had more than $1 billion in AUM at one point, merged all of its funds. It was a good time to get out of the business.
One of the oldest hedge funds, Peter Puccetti’s Goodwood Fund, has a negative 10 year number, and that’s BEFORE the months of February and March.
About 35% of Turtlecreek is down, and about 30% of BloombergSen is down. Thanks to Twitter and the people who send tips. Please keep sending them! Putin is the only person who likes kompromat more than I do.
Sharon Grosman is the only one who can’t be argued with. I see that her firm, SGGG, which manages funds now has almost a monopoly among Canadian hedge funds. I think her fees are set, not based on AUM. Even Spartan spends a lot of their money doing business with her.
How long will the Toronto High Net Worth Dumb Money keep putting money into these bad ideas? I and other people who follow the industry think that a lot more active funds will close in the next 10 years. In fact, Scotiabank has made a list of funds that are likely to be in trouble. The Scotiabank Canadian Hedge Fund Index is the name of this thing.
Read more work here.
