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Salida Capital Freezes Three Funds That Used Lehman as Broker


Date: Friday, October 3, 2008
Author: Frederic Tomesco, Bloomberg.com

Salida Capital Corp., a Toronto-based hedge-fund manager with assets of about C$900 million ($834 million), halted redemptions on three of its funds after the bankruptcy of Lehman Brothers Holdings Inc.

Lehman acted as prime broker for Salida's C$157 million Global Opportunity Fund, the C$85 million Global Prospector Fund and the C$64 million Global Arbitrage Fund, Managing Director Courtenay Wolfe said in an interview.

Salida is one of dozens of investment managers worldwide whose Lehman prime-brokerage accounts were frozen when the New York-based company filed for protection from creditors on Sept. 15. Large securities firms such as Lehman typically offer prime brokerage services to hedge funds and professional investors that borrow stock and cash to invest.

``The Lehman issue is something we are navigating through,'' Wolfe said today in a telephone interview from Toronto. ``We are working very hard to get the securities back for our firm and our investors because we believe they are rightfully and legally ours.''

Canada's Globe and Mail newspaper reported the redemptions freeze earlier today.

Founded in 2001, Salida runs two Canadian hedge funds and six offshore funds domiciled in the Cayman Islands. The firm, which employs about 10 investment professionals, started marketing its C$25 million Global Macro Fund to Canadian investors yesterday as it waits for a resolution of the Lehman problem.

`We Will Thrive'

``We got a couple of orders in yesterday for the fund and another couple more have come in today,'' Wolfe said. ``Salida is definitely not shutting its doors. We are an extremely well- capitalized business. We are expanding and we will thrive through this.''

Bank of Nova Scotia's Scotia Capital unit is the prime broker for Salida's Canadian funds, Wolfe said.

Through August, the Global Macro fund -- which invests in stocks, currencies, bonds and other securities -- had gained 32 percent since the start of 2008, according to Bloomberg data.

One of Salida's biggest funds, the C$118 million Multi Strategy Hedge Fund, dropped 25 percent in September, increasing its 2008 loss to 44 percent, according to a letter to investors.

``Obviously, we are going through a tough patch, but a lot of other funds in Canada are, too,'' said Wolfe. ``We are the largest investors in our funds, and we feel the market pain. As individual investors and principals in the firm, we have a huge vested interest in working these things out.''

To contact the reporter for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net