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Salida pumps up the volume

Date: Friday, April 25, 2008
Author: Andrew Willis, Report on Business

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Salida Capital has quietly put up an eye-popping performance since its launch seven years ago.

The hedge fund is now ready to make some noise.

Toronto-based Salida signed up a co-president this week, charging former BMO Nesbitt Burns executive David Fleck with the task of bringing in new investors and helping to develop new strategies. The new management structure sees the top job split with lawyer Gary Ostoich, as Salida moves from adolescence into money management adulthood.

Mr. Fleck arrives at a time when Salida runs $1.1-billion for a relatively small number of wealthy clients, including several billionaire families. The founders, who include Brad White and chief investment officer Daniel Guy, both former oil analysts, built a strong track record with risk arbitrage and long-short funds that focused on resource stocks.

In 2004, when assets hit $350-million, Mr. Ostoich came aboard as president. He was a pioneer in creating a domestic hedge fund industry while a partner at McMillan Binch Mendelsohn, and gave operational strength to what had been a group of stock pickers.

The Salida team, with nine investment professionals and a total of 22 employees, now has a strong story to tell, as five of its six offerings have averaged 20-per-cent-plus annual performance since inception. The suite of funds now encompasses a range of sectors and strategies. The $240-million Global Opportunity Fund, started in 2002, has returned 50-per-cent annually, after fees.

Despite these results, which make all the global hedge fund lists of top performers, few Canadians have heard of this firm. Enter Mr. Fleck.

After two decades on the sell side of the Street, Mr. Fleck stepped down in February as co-head of equities at BMO Nesbitt Burns. In his 19 years at that dealer, he won all sorts of kudos in institutional sales and management. He also did tireless community work for Dignitas International, an HIV treatment and prevention program based in Africa, and for arts groups.

Like many investment banking veterans, Mr. Fleck reached a stage in his career where he wanted to try something new. Several months of increasingly serious chats with Mr. Ostoich led to this week's creation of a co-president role - there's no CEO at Salida.

In simple terms, Mr. Ostoich is the inside, operational guy, while Mr. Fleck becomes the outside face of a fund manager that's intent on building its profile. (It's not actually that simple, as both have strong but complementary ties in the business community, both are proven leaders in a sector that can undervalue management skills, and both are used to running teams of professionals.)

Most of Salida's funds use strategies that can support far more assets. So if performance can be sustained - knock on wood - then the new co-presidents can look ahead to building a company comparable to soon-to-be-public Sprott Asset Management, which is home to $6.9-billion of assets.

Part of the new money is likely to come from individuals and stockbrokers, as more and more individuals embrace alternative asset classes that used to be institutional turf.

Salida already sells its offerings to the retail crowd, with a minimum investment of $5,000, but hasn't focused on building a following. The groundwork is in place, though, as stockbrokers who place their clients in Salida's funds share the annual 2-per-cent fee that hedge funds charge clients. (Hedge fund employees keep the 20-per-cent performance fee.)

Mr. Fleck plans a trip to Malawi for Dignitas before taking up the reins this summer. Once he arrives, expect to hear more from Salida.

A biggie bids farewell

The head of one of the country's biggest money managers is stepping down at the end of the month, with Peter Clarke preparing to depart as managing director of UBS Global Asset Management Canada, home to $24-billion of assets.

Mr. Clarke is a Nova Scotia native who has been in money management from 23 years, coming up the ranks of what was then RT Capital Management. That firm was sold by Royal Bank of Canada to UBS for $350-million back in 2001.

Mr. Clarke was one of the chefs who successfully blended the cultures of the two organizations, with a focus on the client side of the business. He took the top job at UBS Asset Management Canada three years ago, after Victor Dodig left to run wealth management at CIBC.

Salida Capital hedge fund returns

      Annualized 2007 2008
Fund Inception Strategy return* return return
BTR Global Arbitrage Fund April, 2000 Multi 24.94% 27.32% 0.26%
    (any sector)      
BRR Global Opportunity Fund Sept., 2002 Long/short 50.31% 20.69% 0.34%
    (any sector)      
BTR Global Prospector Fund May, 2003 Long/short 34.13% 22.28% - 9.81%
    (mining sector)      
BTR Global Resource Fund Feb., 2004 Long/short 16.62% 7.70% - 4.23%
    (energy/mining sector)      
BTR Global Macro Fund July, 2005 Systematic/CTA 26.60% 18.97% 30.30%
BTR Global Energy Fund Jan., 2006 Long/short 31.60% 16.21% 4.42%
    (energy sector)      

* Includes March estimates; compounded annualized return since inception including March estimates.