Daily Insights on Pensions and Financial Markets
On Tuesday, the Caisse de dpôt et placement du Qubec released a statement,HR Strategies Announces the Launch of a Qubec Absolute Return Fund:
HR Strategies, a Qubec investment management company, announces the establishment of the Fonds Stratgique Rendements Absolu HRS (SARA Fund), which will invest its assets with Qubec absolute return managers. The Fund will be available to Qubec and Canadian investors.
HR Strategies will act as General Partner of the SARA Fund, which benefits from an initial investment of$175 million. The main investors are the Caisse de dpôt et placement du Qubec ($60 million), Fondaction CSN ($55 million), Fonds de solidarit FTQ ($50 million) and the Rgime de retraite de la CSN ($10 million). More investors may be added in the coming months.
This new fund will rely on fundamental analysis to select managers, based on their expertise, reputation and rigour. The Fund principal objective is to deliver steady, healthy returns to its investors aiming for an average annual return of 5% above the Treasury Bill rate of return.
In Qubec, we have managers who are just as qualified as those of other major financial centres. The SARA Fund will not only enable companies and managers to develop, but will also allow investors to reduce their portfolio risk and obtain attractive and stable returns, said Ren Perreault, President of HR Strategies.
We favour managers who are known for their qualitative strategies and have proven fund management track records, saidMr. Perreault. The portfolios will be completely transparent. We will invest in highly liquid strategies, with managers who will trade primarily stocks, bonds and liquid futures contracts.
The Caisses participation in the SARA Fund will both provide the institution with attractive returns relative to the level of risk and boost the development of Qubecs financial expertise. HR Strategies, a partner the Caisse knows well, has an interesting road map and is renowned for managing absolute return funds of funds in addition to offering very reasonable management fees, saidMario Therrien, Senior Vice-President of Hedge Funds at the Caisse de dpôt et placement du Qubec.
This fund will have a developmental effect on Qubecs financial industry. It will stimulate activity in the sector. Many features, including its transparency and manager compensation structure, are based on the best practices of socially responsible finance, helping position Montral, Qubecs largest city, on this forward-thinking idea, said Genevive Morin, Chief Financial and Corporate Development Office at Fondaction CSN.
In addition to relying on the talent we have in Qubecs financial sector, the SARA Fund promotes the emergence of new portfolio managers and, at the same time, supports Qubec entrepreneurship in this promising sector. In line with our mission, this initiative also meets the objectives of the major Montral Finance project, said Gatan Morin, Executive Vice-President of Investments at the Fonds de solidarit FTQ.
HR Strategies is a member of the Hedge Fund Standards Board (HFSB), an international, London-based organization that aims to implement the industrys best practices and standards, particularly about governance, transparency and manager/investor alignment of interest.. The Caisse de dpôt et placement du Qubec is also a member of the Boards Investor Chapter, which includes 30 institutional investors fromEurope, Asia andNorth America.Mr. Therrienof the Caisse also serves on the HFSB Board of Trustees.
HR Strategies Inc. (HRS) is an independent investment firm formed in 1993 and based inMontreal,Canada. HRS manages portfolios of hedge funds and other alternative investment strategies for institutional and high net worth investors. HRS is regulated by the Autorit des marchs financiers (AMF).
About the Caisse de dpôt et placement du Qubec
The Caisse de dpôt et placement du Qubec is a financial institution that manages funds primarily for public and private pension and insurance plans. AtDecember 31, 2010, it held$151.7 billionin net assets. As one of Canadas leading institutional fund managers, the Caisse invests in major financial markets, private equity and real estate. For more information:
The Fonds de solidarit FTQ helps drive our economy. With net assets of$7.7 billion, as atNovember 30, 2010, the Fund is a development capital investment fund that channels the savings of Quebecers into investments in all sectors of the economy to help further Qubecs economic growth. The Fund is a partner, either directly or through its network members, in 2,052 companies. With its 577,511 owner-shareholders, it has helped, on its own or with other financial partners, to create, maintain and protect 150,133 jobs. For more information, visit
Fondaction CSN invests in Qubec SMBs to contribute to the maintenance and creation of jobs in Qubec from a sustainable development perspective. It manages$800 millionin assets, representing retirement savings from more than 100,000 shareholders. It is the financial partner of about 100 companies and partner and specialized funds in every industry and the social economy.
Im glad to see the Caisse and others are promoting Quebecs financial sector. The Ontario Teachers Pension Pan has seeded several Ontario funds of funds and hedge funds. Its about time we started promoting Quebecs talented managers.
I managed to contact Philippe Dubois, Vice-President atHR Strategieswho is currently in Europe. I asked him about the terms they will be offering and he had this to share:
the Fund will invest with managers at various stages of their development (emerging and established); as such, we have decided not limit ourselves to a single business model (equity/top line revenue share/ rebate/ etc.). I look forward to discussing this when I return.
Should pension plans be in the seeding game? It depends where and how deep their knowledge of the strategies and managers theyre funding. Im all for it because it helps local managers develop their business and then go solicit funds from global pension and sovereign wealth funds.
I told Philippe that I know of five seasoned managers in Montreal who can easily deliver T-bills + 5% and even higher with low risk. All liquid and transparent strategies. There are a few kinks to be ironed out with this new fund (one of them is any potential conflicts of interest), but Im sure this will be a positive force for Quebecs financial sector, which has been in decline for years. I for one fully endorse the SARA Fund and hope more initiatives like this one are in the works.
***Addendum: Established Quebec absolute return funds***
Below, I add a list of a few established alpha managers in Quebec:
1)Sectoral Asset Management: Founded in 2000, Sectoral Asset Management Inc. is an industry-leading specialist in managing global investment portfolios in the healthcare sector.(mostly long-only but can offer portable alpha on their benchmark which they have outperformed over the years. Sectoral won amandate from Norges Bank Investment Management, the investment management firm of the government of Norway.
2)Gestion Critallin: Run by Marc Amirault,one of the most experiencedconvertible bond arbitrage managers in Canada, this is one of the best hedge fund secrets in Canada. Cristallin is also exploring expanding into more liquid strategies, and my bet is that it can easily become a top Canadian and global multi-strategy fund.
3)Hexavest: An investment firm that specializes in equities and tactical asset allocation for institutional clients. This is the old Natcan investment management team run by Vital Proulx, one of the best tactical asset managers in Canada. This firm is a success story and they are already managing billions and can expand considerably (might become Canadas Bridgewater).
4)Fjord Capital Management:Montreal-based Fjord Capital is a specialized currency manager for institutional investors. Excellent team and they specialize in both alpha and hedging strategies.
5) Perseus Capital Inc.: Run by Jean Turmel, whom I had the pleasure ofinterviewing last year, this fund is a global macro fund specializing in liquid alpha strategies, including L/S equity. With the recent addition of my former supervisor at PSP Investments,Pierre Malo, the fund will also look add currency alpha strategies. These are two veterans of Quebecs investment management community with thestrongest process in the businessand high risk-adjusted returns. They are currently looking for a few strategic partners (contact Pierre at pierremalo.).
6)Inncocap Investment Management: Innocap offers hedge fund managed account solutions, using a conservative approach to hedge fund investing with a strong emphasis on transparency, liquidity, asset control and risk management.
7)Fiera Sceptre: Run by Jean-Guy Desjardins, arguably the best entrepreneur in Quebecs investment management industry, this is a leading-edge independent investment management firm focused on delivering competitive and tailored multi-style investment solutions to a diversified clientele of investors.
8)Formula Growth: A specialist in U.S. emerging growth stocks, Formula Growth managesFormula Growth Fundfor individual investors,Formula Unit Trustfor tax-exempt institutional investors and theFormula Growth Hedge Fund. Formula Growth is an independent Canadian company owned by its employees, who are all investors in the Formula Growth Fund and the Formula Growth Hedge Funds.
9)AFC Capital: Dont let their website fool you. AFC Capital is an investment firm specializing in (L/S) North American equities and is regulated by the AMF. The fund is an equity market neutral fund with a fundamental process based on earnings projections. They deliver high risk-adjusted returns and did not lose money in 2008. (Key contact: Alexandre Gagnon, VP Risk Management and Finance at ).
10)Majestic Asset Management: Run by David Bilodeau and Denis Paquette, Majestic is a Commodity Trading Advisor (CTA) registered under the US Commodity Exchange Act and is a member of the National Futures Association (NFA). Majestics flagship fund, the MAJESTIC GLOBAL DIVERSIFIED FUND, offers investors exposure across a wide range of sectors and commodities such as grains, food and fibers, meats, energy products, metals, currencies, stock indices and global bonds.
11)Plensa Pineault: A Quebec-based capital management company. The firm aims to capitalize on trends in futures markets globally through the use of a proprietary quantitative model and a systematic approach to investing.
12)Sigma Alpha Capital:A privately held firm which was founded in May 2003. Ownership of the firm is divided among its four senior partners:Andr Marsan,Luc Lapointe,Jean-Sbastien GarantandJacques Authier. Theirmanagers use futures to structure the portfolios in order to obtain positive returns over the medium term, regardless of the economic and financial outlook.
Swing Capital Inc. is an alternative investment manager whose broad purpose is to preserve and increase portfolio wealth by offering a unique uncorrelated alternative investment program in managed Foreign exchange to qualified investors. Swing Capital Mission is to offer a unique investment vehicle targeting 15-20% yearly returns while maintaining low to negative correlation to both standard and trend following portfolios. The Swing Capital Team is composed of 3 partners:
Both of Swing Capital Managing partners, Mr. Bettan and Mr. Nahmany possess unique core skills in the financial industry. Both have acquired an extensive Foreign Exchange trading expertise in major centers around the world (Montreal, London, and Toronto).
***More Quebec Absolute Return Funds to Follow***
14)Planum:Run by Caroline Bdard, CFA, this is a Long-Short North American REIT fund.Ms.Bdard has extensive experience in this niche strategy as she managed money at Pressima when she worked at the Caisse.
15)Altervest:Run by Genevive Blouin, CFA and CMT, this fund uses derivatives to exploit market inefficiencies. Ms. Blouin is an exceptional manager deliver high risk-adjusted returns. In her own words:
If I had to describe what I do I would say that I actively manage an equity portfolio using listed options very conservatively to enhance returns and exploit niches untouched by large institutional players. It is an exclusive strategy as it is not scalable.The limited liquidity of options keeps large institutional players out of my turf allowing me to produce high risk adjusted returns with a very low VAR.16)Galliant Capital Management: Run by Ian Shaffer, CFA, this is a North American Long-Short Equity fund which uses rigorous earnings models to pick long and short positions. Mr. Shaffer has previous experience with Atticus, a well known US hedge fund.
17)RDA Capital: Run by Francois Magny,RDA Capital is a Montreal based alternative investment management boutique where world classresearchanddevelopmentare combined with exactingapplicationto generate superior non-correlated investment returns. RDA employs a blend of experienced investment expertise and academic talent coupled with state of the art technology to achieve superior risk adjusted returns in all market conditions.
Please note some funds like AFC Capital have closed while others are struggling to stay afloat after the carnage in Q3 2011.Do your due diligence carefully before investing in any fund.
Im pleased to announce that my friend François Trahan ofWolfe Trahan & Co.has started his hedge fund in Montreal,Trahan Capital, and is currently raising funds. François is one of the best strategist on Wall Street and there is a reason why top funds pay big bucks for his research, hes great at analyzing and forecasting markets. You can contact him directly at for more information.
Im also pleased to announce that Quebecs two leading female alpha managers,Caroline Bdard andGenevive Blouin are joining up to run aa Long-Short North American REIT fund. When it comes to delivering real alpha, these sharp ladies can teach the testosterone filled hedge fund world a thing or two. They deserve seed capital not because theyre women, but because theyre damn good at what they do. Contact Genevive at for more information.
Finally, Yves Martin has commenced operations at his fund,Akira Capital, a relative value commodity arbitrage fund. For more information, contact in.
Below, listen to a September 2011 PBS Wealthtrack interview withFrançois Trahan explaining why the old economic models are failing. Great interview but investors should also read the book he co-authored with Kathy Krantz,The Era of Uncertainty.
Canadian-based senior analyst specializing in pension funds and investments across public/private markets. Email:
Ral Desrochers to Head CalPERS Private Equity
Crushing Harvards Mighty Endowment Fund?
Is Private Equity Riskier than Public Equity?
Investors Turning to Active Commodities Strategies…
How to Deal With Excessive Risk Concentration?
Have Pensions Lost The Battle With Ratings Firms?
The National Post publishedanother hit piecefrom conservative commentator Andrew Coyne on how the Canada Pension Plan Investment Board (CPPIB) is lucky with active management, for now:
In 2006, the Canada Pension Plan Investment Board announced it had switched from a passive to active investment strategy. No longer would it merely seek to replicate the performance of the broad equity and bond market indexes in its own portfolio, as it had earlier been required to do; now it would free its managers to pick and choose, buying and selling at particular times in an effort to beat the market.
In pursuit of its new mandate, the fund has undergone a massive expansion in staffing, compensation, and costs. The number of employees has gone from 164 in the year ended March 31, 2006, to 1,661 in fiscal 2019. Total costs have grown from $118 million to $3.3 billion annually, or from 0.12 per cent of assets to 0.83 per cent. All told, the fund has spent about $22 billion over the past 13 y
Christine Idzelis of Institutional Investor recentlyreportedthat private equity is driving two Canadians at BlackRock crazy, and theyre trying to fix it:
BlackRocks new private equity fund is nearing its first purchase of a company, with a chance it could do something unusual in the industry:Never sell it.
Its sure to be a highly scrutinized deal, coming as the firm seeks billions of dollars for the pool of capital, which is designed to push the evolution of the buyout industry.
Were under exclusivity for one transaction right now, says Andr Bourbonnais, the head of BlackRocks long-term private capital team, known as LTPC. The fund, which aims to raise $10 billion to $12 billion, may complete the deal within weeks.
Theyve been shifting a portion of their core real estate holdings to properties under development or renovation, Azelby said Thursday during a UBS Asset Management lunch with media in New York. Azelby, who joined UBS from Apollo Global Management this year, said on the sidelines of the gathering that pensions may pick up an additional 200 basis points to 300 basis points of yield by doing so.
Azelby sees these riskier bets as an area of potential concern because pensions had similarly stretched for yield in the runup to the 2008 financial crisis. Rising investment in properties being developed during the later stages of the economic cycle is worth monitoring because a downturn could leave pensions holding vacant building
Scott Burns wrote a comment for Dallas News,Couch Potato investing beats the teachers pension fund again:
The Teacher Retirement System of Texas pension fundis $46.2 billion in the hole, only 76.9% funded. Had the managers chosen thesimplicityof Couch Potato investing 10 years ago, the pension would be fully funded.
I learned this while examining thelatest reportfrom the largest public pension fund in our state. Then I measured it against the simple, low-cost index fund investing method I have advocated fornearly 30 years.
The report puts a good face on the results for the year ending Aug. 31, 2018. It notes that the 8.2% return for the 2018 reporting period is higher than its target return of 7.6%.
But heres the reality. Another year of complexity, alternative investments and hedge fund commitments has tripled the annualized return gap between the pension fund and Vanguard Balanced Index fund (Admiral shares) over the traili
John Gittelsohn of Bloomberg reports,How Fast Can CalPERSs $360 Billion Grow?:
In January, Ben Meng started his job as chief investment officer of a seriously big fund: the $358.4 billion California Public Employees Retirement System, or CalPERS, the largest U.S. pension. But neither the scale nor the political spotlight that comes with the role seems likely to intimidate him. For the last three years, he was deputy CIO at the State Administration of Foreign Exchange (SAFE), the tightly controlled $3 trillion reserve fund in China. Its not often that an individual has the opportunity to hold key roles for two of the largest pools of capital in the world, wrote Stephen Schwarzman, chief executive officer of private equity giant Blackstone Group LP, in an email.
Perhaps more daunting for Meng is this figure: 7 percent. Thats CalPERSs annual return target. It may not sound very high given that the S&P 500 returned almost an annualized 11 percent in the five years through Janu
Today, the Public Sector Pension Investment Board (PSP Investments) announced itsfiscal 2019 results:
The Public Sector Pension Investment Board (PSP Investments) announced today that it ended its fiscal year March 31, 2019, with net assets under management (AUM) of $168.0 billion, compared to $153.1 billion the previous fiscal year, an increase of 9.7%. The investment manager also reported a one-year total portfolio net return of 7.1% and a 10-year net annualized return of 10.7% on its investments and generated $90.1 billion of cumulative 10-year net performance income and $48.8 billion of cumulative net investment gains above the return objective.
We have great reason to be proud of our strong performance and evolution on the world stage, said Neil Cunningham, President and Chief Executive Officer at PSP Investments. We saw robust levels of investments throughout fiscal year 2019 and, despite market headwinds, these results clearly show the long-term success of our diversified
Arleen Jacobius of Pensions & Investmentsreportson how institutions are piling into infrastructure across North America:
Relatively new as an institutional asset class in the U.S., infrastructure is one of the fastest growing real asset classes in North America, albeit from a small base, industry insiders say.
Infrastructure, along with energy, exhibited the most growth of any private asset class among the largest 200 U.S. defined benefit plans in the year ended Sept. 30, according to Pensions & Investments annual survey.
This trend is expected to continue as investors look for consistent income. Further underscoring the asset class, the Trump administration unveiled a plan as part of its 2019 budget proposal that it said would generate $1.5 trillion in public and private infrastructure investment during the next decade, according to the administrations Rebuilding Americas Infrastructure fact sheet. However, the proposal does not include a funding source. In Read more>