Norshield acquirer's investor message: Keep faith

Date: Tuesday, May 10, 2005
Author: PAUL WALDIE- GlobeinvestorGold

The prospective new owner of hedge fund company Norshield Financial Corp. is urging investors to stick with the business despite its troubles.

"I think this will all go away and we will get back to making money," said Ted Cantlon, a Calgary businessman who signed a letter of intent to buy Norshield last Friday.

Montreal-based Norshield has been reeling from a flurry of redemptions in recent months and a prolonged legal battle involving alleged links to the scandal that erupted five years ago around Cinar Corp., a producer of cartoons. Norshield has denied any direct connection with events at Cinar.

Last week, the company said it was forced to suspend redemptions in one of its core family of Olympus funds because of mounting attention to the allegations. The move froze about $375-million in assets and left many Norshield investors in limbo. In the past nine months, Norshield's assets under management have shrunk to $625-million from more than $1-billion.

Mr. Cantlon said he approached John Xanthoudakis, Norshield's chairman and chief executive officer, a few weeks ago about buying the company. "I have some stakeholders who are interested in alternative investment management strategies and we saw an opportunity," he said yesterday. "We formulated a strategy and we made an offer to purchase the assets."

He said Mr. Xanthoudakis is not involved in the deal but will remain with the company in some capacity. "We want to empower John to get back to doing the things he does well, and that's doing his computer modelling and identifying excellent investment opportunities," Mr. Cantlon said.

Terms of the deal have not been disclosed; Mr. Xanthoudakis was unavailable.

Mr. Cantlon's bid is being made through Aragon Investments Corp., a company he created on April 27. The deal is expected to close at the end of June.

Mr. Cantlon, 56, acknowledged that he has never run a hedge fund business before. However, he said he has more than 30 years' experience in the investment and financial services industry. His latest venture was a private company called O'Tin Power Corp.

"What I do right now, through a private company, is deal structuring and corporate finance consulting," he said. "I'm not a licensed portfolio manager. I have been licensed in the past. I'm just looking forward to new opportunities."

Mr. Cantlon said he and his partners view the hedge fund business as a growing market in Canada. Hedge funds are pools of money that are supposed to make money for clients regardless of how stock markets behave.

Although typically reserved for wealthy clients, many hedge funds have been offering products aimed at average investors. Those products have become the fastest-growing segment of Canada's $14-billion hedge fund industry in recent years.

However, the recent collapse of Toronto-based Portus Alternative Asset Management Inc., amid investigations by securities regulators, has hurt the market.

"We don't see the hedge fund market as going into a tough a time," Mr. Cantlon said. "What we see is a tremendous future in the financial markets as people are looking for alternative investment opportunities."

Mr. Cantlon said he is not concerned about the lawsuits over Cinar. It ran into controversy five years ago over allegations of a misuse of tax credits and the transfer of more than $120-million (U.S.) offshore.

"Cinar is a non-issue. My stakeholders and myself have confidence in John," Mr. Cantlon said, referring to Mr. Xanthoudakis.

He added that he hopes investors in Norshield will remain patient. "When we get through the due diligence process, it will be our job to talk to [investors] and give them some comfort that this is a go-ahead situation," he said. "We're buying this platform as an opportunity to make money for existing and new shareholders."