Reports of hedge funds' demise exaggerated

Date: Monday, March 6, 2006
Author: KEITH DAMSELL- Globe & Mail

There are some signs that hedge funds -- the beat-up asset class beset with scandal last year -- are poised for a recovery.

"On the institution side, we're getting a lot of traction and retail is coming back," said François Godri, senior vice-president of sales at Lake Shore Institutional and Dealer Relations. The British-based alternative asset manager oversees about $900-million (U.S.) and is stepping up its presence in Canada.

The 2005 collapse of Portus Alternative Asset Management Inc. and Norshield Financial Group "were a kick in the knees," Calgary-based Mr. Godri said. "But the dealerships will come out of it stronger."

Indeed, there was evidence last week that investors are rethinking hedge funds. On March 1, UBS Canada opened a hedge fund administrative office in Toronto, part of the brokerage's "beefed up" support for expanding business from offshore and Canadian hedge funds, spokesman Graeme Harris said.

That same day, more than 100 European institutional investors and private bankers gathered in Switzerland to hear from about a dozen Canadian hedge fund companies. The forum included the launch of the Scotia Capital Canadian Hedge Fund Performance Index, a monthly snapshot that tracks funds managed by Canadian advisers with a minimum of $15-million (Canadian) in assets under management.

Attendees in Zurich had "a tremendous amount of interest" in Canada, said Les Marton, managing director of Scotia Capital Inc. and forum sponsor. Interest in hedge funds is "moving down to the next level" from institutions to more sophisticated financial advisers and retail investors, he said.

"Business has been great," said Jim McGovern, managing director and chief executive officer of Arrow Hedge Partners Inc., the Toronto manager of more than $550-million in assets. "It's been solid since the fall."