Hedge funds

More Blind Squirrels of Bay Street

Updates on various hedge funds. Jeff Banfield, Waratah, XIB, Avner Mandelman and more!
OPM 4 min read

Many years ago, I met a leading Bay Street hedge fund manager. He told me that all he cared about was performance and the bragging rights that come with it. He said that asset growth (AUM) must be subservient to performance. I thought this was well put. And in the decade-plus I have followed him, he has truly lived up to his credo: his performance has been crappy, but his asset growth has been even crappier.

Here's some more performance updates - I’m highlighting some more positive stories this time. I use "Blind Squirrel" as a generic term of endearment (from the expression "Even a blind squirrel finds a nut once in a while").

One shiny new fund is called XIB, run by Sean McNulty and Chris Seyffert along with co-founder Peter Hatziioannou. They started just this past August, and are up 10.30% YTD (up 1.85% in March). They write:

The Fund’s performance for the month can largely be attributed to capitalizing on index and ETF trading flows, opportunistically executing defensively hedged pair trades, and establishing favorable entry points in select M&A arbitrage spreads.

The Polar Multi-Strategy fund is down 2.6% YTD, while the Long/Short fund was up in March and down 0.71% YTD.

The Waratah Performance numbers are in: the fund was up 1.8% in March and is up 4.1% for the year. But that’s nothing. Avner Mandelman grew his Twitter follower count by 29% in the past week alone. Take that @BradDunkley. Avner used to have a US-domiciled hedge fund, called Giraffe Capital. I wrote him once because I had the same administrative burden of having a US vehicle while living in Canada. But he never replied. And now that he’s active on Twitter, I followed him and liked some of his Tweets. But he didn’t follow me back! Cold! But I assure you OPM Wire is not some forum for settling petty grievances. If he keeps his high growth rate, Avner will have 46 followers next Wednesday.

A hopeless simpleton like me can’t be expected to track credit funds, but I am told one biggie, RPIA has a fund that’s down about 30% YTD. Algonquin has a fund that’s down 16% YTD. Maybe that’s good in their world, I don’t know.

HGC Arbitrage Fund was down 4.82% for March and is up 1.45% YTD. When I take a quick look at their returns since mid-2013, it looks like a real arb fund (ie small, steady numbers). But I really don’t know much about them, except that Brett Lindros works for them and I have his rookie card somewhere.

Pender Fund of Vancouver has some of the more atrocious numbers I have seen, ranging from losses of 33% to 40% YTD. Last year, they acquired a few funds from Vertex One, which appeared to be winding down. The Vertex One people said they carefully looked for a partner that shared their thinking. Looks like they have succeeded. One of the rationales offered for merging funds was the possibility of exploiting accumulated tax losses. Turns out Pender is good at generating those organically too! So Vertex One looked all over the country and by coincidence found a partner just down the street. I listened to their conference call when this happened and I thought Pender’s thinking was rather banal. Take for example: “David is a true contrarian”. It’s a meaningless statement and a logical flaw. The crowd is often right! In 2020, the game is very competitive, the insights need to be really sharp, not generic fluff like that. You people seem to love vitriol, hope you’re satisfied.

I see Google algorithms take me seriously:

On the other hand, I am not responsible for the second entry and that's in all likelihood completely unfair. Banfield's fund has done well in March, being only down 1.91%. You can always tell a lot about a manager's thinking from his writing. Here's a passage from Banfield's February newsletter:

The fund was up between 0.50% and 1.00% for the month until the last day when gold stocks became the only thing left for investors to sell. As we have seen in times of financial stress, everything eventually becomes correlated, and gold is no exception. Selling in gold led to selling gold equities that day and pushed the fund to a small loss. Let us be clear we owned great gold companies, and were short gold, and poor quality gold equities. We have subsequently exited this position.

I like Universa’s approach of a Decennial Letter - talking about ephemera rarely comes across as intelligent, unless it’s done by a pro like me.

In January, they were bearish, writing:

Buying stocks at all time high PE multiples, with little sign of growth in the future, to turn around and try to sell these same stocks at higher multiples at a future date is not a game we want to play.

Mean-spirited people would say, does he have any privates and how are they priced, but I say, let him enjoy his outperformance. My piece on Jeff Banfield was less than reverential. Was I wrong and is Jeff Banfield - who was once palling around with the likes of Salida and Leeward - the next George Soros? Let not your heart be troubled, faithful reader, the passage of time will resolve such vexing questions. I like our chances! In the hedge fund universe, many are called, but for most of us, it's a wrong number!

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