Thursday, March 6, 2014

Promoting Quebec's Hedge Funds?

This comment is bilingual so bear with me, I will translate the important parts of the article. Richard Dufour of La Presse reports, Les petits gestionnaires de portefeuille québécois se regroupent:
Dans le but d'encourager les caisses de retraite et les fortunes familiales à leur confier plus de mandats de gestion, de «petits»gestionnaires de portefeuille québécois mettent sur pied un organisme pour les représenter.

Pour l'instant, une quarantaine de firmes avec un actif sous gestion inférieur à 1 milliard forment ce qu'ils ont convenu d'appeler le Conseil des gestionnaires en émergence (CGE).

L'objectif initial est d'amener les institutions et fortunes familiales à investir au moins 1,5 milliard avec des gestionnaires en émergence locaux au cours des deux prochaines années.

«L'écosystème financier est très mauvais ici pour favoriser l'entrepreneuriat de nouvelles firmes en gestion de portefeuille. Individuellement, on n'a aucun pouvoir, mais quand tu as la voix d'une association, c'est différent», commente Geneviève Blouin, présidente du conseil d'administration du CGE et présidente et fondatrice de la firme Altervest.

«Il m'a fallu de l'aide pour identifier une quarantaine de gestionnaires de portefeuille québécois en émergence. J'en connaissais à peine une vingtaine. Si moi qui suis dans ce petit milieu, je connais peu de joueurs, on ne peut pas demander à une institution de tous les connaître.»

Lancement

Le CGE tiendra son événement de lancement le 24 avril à la Bourse de Montréal sous la forme d'un cocktail-rencontre. Environ 400 invitations seront lancées à des institutions et fortunes familiales du Québec, du Canada et des États-Unis.

Fiera Capital et Hexavest, dont les actifs sous gestion s'élèvent respectivement à 77,5 milliards et 18 milliards, sont deux succès québécois d'entrepreneuriat local en gestion de portefeuille et le CGE souhaite contribuer à en créer d'autres.

Hexavest et l'organisme Finance Montréal appuient le CGE et entendent apporter leur contribution. Robert Brunelle, d'Hexavest, et Michel Delisle, de Finance Montréal, sont membres du conseil d'administration du CGE.

Des études sont en cours pour tenter de dégager des recommandations qui pourraient permettre aux membres du CGE de mieux se développer. Ça pourrait déboucher sur l'élaboration d'un programme précis au Québec.

L'exemple d'Hexavest

C'est par le truchement d'un programme américain de gestionnaires en émergence qu'Hexavest a obtenu en 2008 un premier mandat de gestion aux États-Unis auprès de l'État du Maryland.

«Sans ce programme, ça aurait été difficile de percer du côté américain», dit Robert Brunelle.

Aujourd'hui, Hexavest a une trentaine de clients américains qui contribuent pour 5 milliards en actifs, soit 25% de l'actif sous gestion totale de la firme.

Les membres du CGE:

Giverny Capital

Cote 100

Gestion Palos

Medici

Formula Growth

Nymbus Capital

Majestic

RDA Capital

Tonus Capital

Perseus Capital

Alphafixe

White Star

Stanton

Placements Idema

Gestion de portefeuille Landry

Tactico

Gestion Crystallin

Cape Cove

Gestion de placement Hélène Dion

Robusta

Alizé Capital

Allexium Gestion d'actifs

Fitmoo

Fjord Capital

Les Investissements Rivemont

Galliant

Windermere Capital

Triasima

IPSOL

Gestion de placement Rempart

Capital 2

Altervest

Diamant Bleu Canada

SigmaAlpha

Akira

Chapados Couture Capital

BT Advisory

Globevest Capital

Gestion d'Actifs Global Alpha
I'm glad La Presse published this article. I like Geneviève Blouin a lot and support her efforts to get Quebec's smaller money managers on the map. Geneviève and Caroline Bédard are working very hard at Altervest and they're posting solid and steady returns. Keith Porter recently joined them to manage money in emerging markets but they run a L/S REIT fund and are doing well. They need more exposure and more money so send out your due diligence teams to meet them!

Unfortunately, I can't say the same about many of the other funds I covered a couple of years ago when I covered Quebec's absolute return fund. Most of them are struggling or closed shop altogether for performance reasons. It ain't easy starting a hedge fund in this environment, especially in Quebec where these entrepreneurs get virtually no support from the Caisse and other large pension funds.

Most of the money HR Strategies doled out in their SARA Fund, which was backed by the Caisse, FTQ and Fondaction CSN, went to Fiera Capital and Hexavest, which is not exactly supporting emerging managers. I like Hexavest a lot and think highly of Vital Proulx but he'll be the first to admit he didn't need money from HR Strategies.

As far as Fiera Capital, I think Jean-Guy Desjardins is losing his magic touch. They're way too focused on sales and distribution but the performance of their individual portfolios is lacking. They are not hiring the right people to bolster their performance and until they do, they will have serious challenges raising more assets from institutional clients (Jean-Guy's charm can only go so far). The one portfolio manager I really like a lot at Fiera is Nadim Rizk and he has a long stellar track record and knows what he's doing. I also hear great things about JP Choquette who runs a L/S fund at Fiera and had an outstanding year in 2013.

Who else? My good friend Yves Martin at Akira is struggling to survive because commodities are out of favor and it's been very tough making money in this asset class. Yves is a fighter and I hope he can survive this storm in commodities using the arbitrage strategies he and his team are good at (Update: Akira closed shop shortly after this post).

Francois Magny at RDA Capital is also struggling to survive. I stopped receiving his monthly performance reports a while ago after he had a serious drawdown.

Jean Turmel at Perseus is also struggling in terms of performance but he's lucky the National Bank is backing him up. It's funny, when we last spoke, he had concerns about me trading since I have MS but LTK Capital Management has been kicking his fund's ass and that of most other smaller Quebec funds named in the article above. Unlike all these funds, I eat what I kill and rely on nobody else but myself to make a living. It's a lot harder making money when you don't receive blowjobs from Goldman Sachs and other investment bankers recommending trades to you on a daily basis.

In the L/S Equity space, Ian Shaffer at Galliant Capital is posting solid numbers and I track him very closely. He used to work with Tim Barakett over at Atticus and I know he knows what he's doing. If he can only get away from Stanton Asset Management and the O'Leary family of funds and make a real go of managing his fund completely independently.

My good friends at Gestion Crystallin also struggled over the past year but their performance has improved a lot over the past few months and I trust Marc Amirault as a money manager. He has the most experience from all these Quebec hedge fund managers but his convertible arbitrage strategy reached capacity at $180M and he's now trying to move into global macro and other strategies he has no proven track record on. In my humble opinion, he is not hiring the right people for these new strategies (he should have hired Derek Hulley and forget the rest!).

My other good friend, Francois Trahan, closed up shop and moved his family back to New York where he now works as a partner at CornerStone Macro. Francois is a great strategist but making money in these markets is a lot harder than producing stellar research reports, which he and his team do wonderfully.

The best emerging hedge fund managers in Quebec have yet to be seeded. HR Strategies is looking at one of them now and they better seed him fast or else I will publicly demolish them on my blog (it's a no-brainer, he has the potential to be huge by Canadian and U.S. standards!).

As far as the Caisse, FTQ, and Fondaction CSN, they are continuing to do everything in their power to keep Quebec's money managers down. There is no support whatsoever and these Quebec pension funds are a joke when it comes to supporting Montreal's talent (much sexier flying business class to London, New York and Geneva to schmooze with Tatiana, Svetlana, and other hotties working at MCM Capital Management. French Quebecers are jealous by nature and love keeping other French Quebecers down, it's pathetic (Martin Roberge once told me: "There are two types of French Quebecers, those who think like Ginette Renault and those who think like Celine Dion.").

There is another fund missing on the list above, Razorbill Advisors, a $100M tail risk fund run by Pierre-Philippe Ste-Marie (pierre@razorbilladvisors.com). I haven't met them yet but they posted solid numbers when they were working at the National Bank, which remains their largest investor.

And yet another super success story that keeps getting ignored is Letko, Brosseau & Associate. They are a long only value fund with assets in excess of $25 billion. Peter Letko and Daniel Brosseau have done a wonderful job growing that firm but they're virtually unknown outside of Canada. I now track them and Hexavest in my quarterly review of top funds' activity.

There are a few firms in the list above which I never heard of and others I wouldn't touch with a ten foot pole. Again, this is a tough environment and most of these funds are struggling to survive. It doesn't help that they get no support whatsoever from the Caisse and other large Quebec pension funds. And even Quebec's billionaires, including the Desmarais family, are way too conservative. Very few family offices in Quebec and Canada do anything remotely like the Bass family office in the U.S. (a true pioneer in seeding top talent in hedge funds and private equity).

Below, Alissa Douglas is Director, Hedge Funds and Public Markets for C.M. Capital Corporation, a multi-family investment manager based in Palo Alto, California, discusses why family offices are moving away from mega to smaller hedge funds (March 2011). Good move, most smaller hedge funds are outdoing their elite rivals, except for Soros, who remains the undisputed king of hedge funds.

Update: make sure you read my follow-up comment on promoting Quebec's hedge funds, the Tiger fund burning bright. As |I state there, if Quebec's hedge funds want to compete with the best of the best in the world, they need to post the numbers and run a successful operation. I'm done shilling for Quebec hedge funds, many of which owe me a lot of money and praise for giving them coverage.