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Canadian Alternative Investment Firms

Alternative Investment Firms in Canada

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Canadian Alternative Investment Firms continues to grow as more high-net-worth individuals and institutions seek new avenues to maximize growth and guard against potential downturns. Strategically managed alternative investments operate beyond the realm of traditional stocks, bond, and money markets.

According to Bloomberg, Canada hedge funds reported approximately C$35 billion under management in 2016 compared to the total United States hedge funds AUM of US$2.2 trillion. However, size does not always translate to success as the Canada investors enjoyed better returns than non-Canadian or Global hedge funds during the past two years. In 2015, for example, Canadian hedge fund investors earned a 6.2% return while non-Canada funds combined for only 0.7% return.

Being smaller and more nimble has advantages in the hedge fund industry.

While there is never guarantee of success, sophisticated hedge fund strategies aim to maximize returns while lowering risk by using formulas that integrate non-mainstream investments such as currencies, long-short positions in equities, REITs, commodities, distressed securities, futures, and more. Some fund managers use a global macro view that anticipates the impact certain political activities may have elsewhere in the world.

Accredited Canadian investors must first meet provincial or territorial securities requirements where they reside to participate in these funds.

Cross-Section of Canadian Alternative Investment Firms

Across Canada, six notable alternative investment funds and their headquarter locations include:

Nicola Wealth Management, Vancouver, B.C

Nicola Wealth Management stated philosophy includes going beyond stocks and bonds for an integrated strategy. Taking their fiduciary responsibilities seriously, Nicola Wealth endeavors to reach beyond traditional investing to increase investment returns and reduce tax burdens. Nicola’s investment “pools” utilize a cash flow strategy that focuses on stable income to offset the variations in volatile markets.

Auspice Capital Advisors, Calgary, Alberta

Auspice Capital Advisors in Calgary targets rules-based investment strategies through collaboration and scientific research processes. Auspice recognizes the inefficiencies of financial markets that often move irrationally and are driven by emotion or cognitive bias. With a passion for alternative investing, the managers continually evolve their portfolios with non-correlated return investments. The Auspice Fund was Morningstar’s 2011 Silver Medal Winner for the Best Opportunistic Hedge Fund and winner of the 2015 Altegris CTA Challenge.

Edgehill Partners Funds, Toronto, Ontario

EHP Partner Funds in Toronto is a boutique alternative investment fund offering a family of funds with varying approaches. The Funds are:

  • Guardian Fund: a defensive, capital preservation fund designed for minimal net exposure
  • Advantage Fund: diversified and liquid, Advantage employs liquid, long/short fund strategies.
  • Select Fund: targets high performance, mainly with Canadian long/short positions, sector diversification, while minimizing risk with their “risk gearing” techniques.

Lightwater Partners, Ltd., Toronto, Ontario

Lightwater Partners boasts a cumulative return of 14.88% over the past three years. The Fund consists of the Lightwater Long Short Fund and their Nimble Fund. Both target mid-cap and large-cap equities to manage long-short positions, each with a defined maximum number of equities at any time. Their low-risk strategies have yielded superior results compared to the broader market during the past 9.5 years.

Ipsol Capital, Montreal Quebec

Ipsol Capital of Montreal employs three statistical components to drive their investment strategies. These are:

  • Efficient Diversification of Mispricing
  • Efficient Balance of Risk Premiums
  • Statistically Efficient Diversification

Overlapping these three elements for any investment or asset class drives Ipsol’s investing strategies.

Claridge Inc, Montreal, Quebec

Claridge Inc. is a private investment firm that targets entrepreneurial creativity and private equity. The company is active in hedge funds, public investments, and real estate. Claridge balances their portfolio through long/short positions, multi-strategy funds, and event driven/distressed funds.

Investing in Canadian Alternative Investment Firms

While these six are simply meant to be a cross-section of the types of alternative investment firms in Canada, the list of funds continues to grow.  The Canadian Venture Capital & Private Equity Association (CVCA) lists over 250 members, ranging from traditional banking groups to pure hedge fund or alternative investment managers.

The Alternative Investment Management Association (AIMA), with an office in Toronto, represents 1,800 companies involved around the world that are involved with or actively managing alternative investments. The group’s mission is to educate and encourage best practices among members.

Alternative investing companies are as varied as the strategies they employ. One size does not fit all, and individual investors should first understand manager rationale, the correlation among the pool of investments, risk-reward, and all downside potential before investing. Past performance is a positive indicator but not a guarantee of success. Often alternative investing strategies take years to play out, thereby tying up assets for a considerable period.

He hope you found this article valuable. If you have any questions about Canadian alternative investment funds, we invite you to contact us. It will be our pleasure to answer your questions about Canadian hedge funds and investment options.

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