A hedge fund is an investment pool, where a limited number of investors contribute funds. It is managed by a professional manager with the objective to maximize returns, as well as minimize the risk for the investors. Hedge funds are known to generate returns even when the markets fall, and this is the reason why investors trusted them even when the coronavirus pandemic was making global markets bleed. The same is true for the Canadian hedge fund industry as well. If you are planning to invest in them, then to help you make a decision, detailed below are top hedge funds in Canada.
Top hedge funds in Canada (all categories)
Below are the top hedge funds in Canada on the basis of combined 10-year annualized return and the Sharpe ratio:
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GFI Good Opportunities Fund
As of June 30, 2020, this fund had a 10-year return of 16.04% and 10-year Sharpe of 1.35%, according to Alternative IQ. This fund usually invests in 10 to 15 core holdings and includes both long and short investments. Usually, each holding accounts for a meaningful portion of the portfolio. Also, the fund is ready to short the holdings if there is an opportunity. Since its inception in 2008, the fund has returned over 10%.
As of June 30, 2020, this fund had a 10-year return of 11.05% and 10-year Sharpe of 1.35%, according to Alternative IQ. It is a flagship fund of Waratah Capital Advisors. At the time of its inception about ten years back, the fund targeted a 15% annualized return over the five and ten-year period. Now, the fund has changed its target, and is aiming for a 10% return.
JM Catalyst Fund
As of June 30, 2020, this fund had a 10-year return of 8.11% and 10-year Sharpe of 1.23%, according to Alternative IQ. It is a long biased, multi-strategy hedge fund with an objective to offer long-term capital growth by taking long and short investment positions in equity, debt and option securities.
Top equity focused hedge funds
Following are the top three equity focused hedge funds in Canada on the basis of five-year return:
Dynamic Global Growth Opportunities Fund
This fund, with an inception date of March 2015, has a 5-year return of 18.74% as of June 30, 2020, according to Alternative IQ. The objective of this fund is to deliver superior long-term equity-related returns. It has a minimum investment requirement of $5,000 for accredited investors and $150,000 for investors who are not individuals.
GFI Good Opportunities Fund
This fund was the top overall on the basis of 10-year return and Sharpe, but is at number two in the equity category. It has a five-year return of 15.14%.
Portland Focused Plus Fund LP
This fund, with an inception date of March 2016, has a 5-year return of 15.12% as of June 30, 2020. The objective of the fund is to generate a satisfactory return over long-term, as well as the preservation of capital. To achieve its objective, the fund focuses on investing in a limited number of long securities positions and leverage by buying securities on margin.
Top credit focused hedge funds
Following are the top hedge funds in the credit focused category in Canada on the basis of five-year return:
Algonquin Debt Strategies Fund LP
This fund has a 5-year return of 8.07% as of June 30, 2020. The objective of this fund is to assist investors and portfolio managers address the challenges of the low yield environment. To achieve its objective, the fund uses alternative fixed income strategies. It mainly invests in North American investment grade issuers.
“The core of our approach is to hedge the interest rate risk in corporate bonds and isolate the credit exposure,” the company says.
YTM Capital Credit Opportunities Fund
This fund has a 5-year return of 7.50% as of June 30, 2020. It is a long short hedge fund that offers Canadian investment grade credit exposure. This fund targets a long-term return of 7 to 9% with volatility. Its portfolio includes short maturity investment grade credit with neutralized interest rate risk. The fund is at second place as well on the basis of the five-year Sharpe ratio.
East Coast Performance Fund LP
This fund, with an inception date of September 2009, has a 5-year return of 6.91% as of June 30, 2020. East Coast offers investors access to Canadian investment grade corporate credit. As per the company, it achieves its investment objectives using three main trading methodologies – Core Credit Portfolio, Relative Value Opportunities and Active Trading.
“Investors in our funds are permitted the opportunity to earn higher returns while being protected from capital losses typically incurred in fixed income due to rising rates,” the company says.