Polar has been around for a long time and is one of the few Canadian hedge funds that are good enough for institutions.
Polar Asset Management, which began in 1991 and now manages about $6 billion, is likely the oldest and biggest hedge fund company in Canada. They are a multi-strategy company that takes advantage of different arbitrage and directional niches.
Their top multi-strategy fund has made money every month since December 1991, while the S&P 500 has only made money 9.8% of the time. The fund was risked with the money of three partners and the support of a well-known Canadian family whose name I don’t know.
I seem to remember that they also had a software-focused private equity business at one point. Polar had a captive brokerage affiliate for a long time, but in 2017 it got rid of it. Paul Sabourin is the top banana and the CIO.
Paul started at Burns Fry, which later became Nesbitt Burns, as a small-cap research analyst. He then moved to trading and eventually became a director of the company. He is in charge of the flagship multi-strategy fund, which focuses on convertible arbitrage, merger arbitrage, and other special situations.
Let’s stop for a moment to watch an episode of “That Time I Met…”
I was trading on my own in 2006 and was interested in taking care of a book. I heard that Polar was a company that let people run their own books and had an open mind. So I sent Paul Sabourin an email, and he agreed to meet me right away.
I think Paul wore a green sweater when we met, but I could be wrong. It could have been blue or burgundy. The first thing he asked me was about a trade I was working on. So I started to talk about Bioscrypt, which was a biometric security concept stock. (At the time, I was interested in small, risky stocks. I didn’t really believe in them, but I thought I could buy and sell them).
Paul stopped me and said, “No, that’s not how we are.” The important part of the meeting was pretty much over at that point. I wouldn’t say the meeting was abrupt, and if anything, I’ve grown to appreciate how clear-headed everyone was.
Phil Schmitt was another co-founder.
Let’s take a short break for the first episode of When I called, I…
Phil seems to have been a big part of how Polar grew. Phil left Polar in 2005 and started Summerwood Group, which is in the business of putting out new, innovative products for alternative investments. In 2009, I wanted to start a Canadian fund, and someone told me that Summerwood could help me stay on the right side of the law.
So, I talked to Phil. My notes say, “He speaks well and seems to know a lot about rules and regulations.” But I didn’t go with Phil. I found a solution that was closer to me. I believe Summerwood is still doing business with big funds.
In 2006, right around the time I met Paul, Tom Sabourin took over as CEO. I see, so what does Tom Sabourin have that I don’t? Did you know that L-1, which was listed on the New York Stock Exchange (NYSE), bought Bioscrypt in 2008? In 2010, BAE Systems, a multinational defense company, bought L-1. It wasn’t a shady business!
I also see that Paul Sabourin backs Diagram Ventures, which is an experiment in venture capital by Paul Desmarais III. So, my guesses aren’t good, but Paul Bambino’s dabbling in a field where he doesn’t have much experience is fine? I understand how it works. Investing in venture capital is not real investing. Who’s kidding who now?
Late-breaking news: I see that Polar Equity Partners, the private equity arm of Polar, is still in business. They are experts in helping companies deal with generational changes, changing markets, and competitive headwinds. Is there a business like that?
On a different, unrelated note, some people who wrote to me were happy to tell me that Polar’s performance has gone down a bit in recent years (I am paraphrasing more tactfully). I don’t like this kind of behavior. Our industry is having a hard time, and now there is a bear market. I, for one, will keep putting my attention on the good.
Anyway, I don’t care about niches like convertible arbitrage, and I wouldn’t know how to benchmark them, so I don’t want to be responsible for figuring out their numbers. Also, is beating some arbitrary benchmark the only thing a money manager needs to do to keep a client happy?
How about the value of building a long-term relationship with a friendly, sweater-wearing man like Paul Sabourin, who makes a good impression even when he rejects you in less than 5 minutes? In 2008, the multi-strategy fund only lost 8% of its value, which is a big deal. 2008 was a bad year for many arbitrage funds.
I’m very impressed by the kind of business Polar has built, which is good for institutions….
I thought that they were less than $5.5 billion. The growth was not very fast. They crossed the $100 million mark for the first time in 1998, and then again in 2002, because of a bear market in between. They passed $1 billion in 2008 and have grown a lot since then, even though the hedge fund industry has been having trouble.
Most of their AUM comes from places other than Canada (from funds-of-funds, Swiss institutions, etc.) They still manage to charge full hedge fund fees of between 1.5% and 2% fixed plus 20% performance. They only have 73 employees, so it must be a pretty profitable business, even if employees are given a lot of freedom.
If you add up Paul’s nearly 30 years of managing large portfolios, running a brokerage business, and investing in private equity, you’ll find that he must have a lot of money. I don’t want to make him angry, as you can probably tell. At the very least, I should talk to him again. Do you think it would be weird to ask to get together again 14 years after that short meeting?
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