Canadian firm brings US fund to European shores

JC clark plans north american long/short debut in europe

Canadian hedge fund operator JC Clark & Co is to target European investors with a Dublin-listed unleveraged version of its three-year-old North American long/short hedge fund this summer.

John Clark, chairman of JC Clark, who started the Barbados-domiciled Preservation Capital Limited fund for private investors before opening it to the public, said the portfolio ranges from 60 to 80 positions but it will retain at least 55% of assets in Canadian equities.

The fund, which conducts valuations, subscriptions and redemptions daily, cannot hold more than 7.5% of its value in any one position.

Clark does not wish the fund to grow to beyond C$500m, pausing at C$250m to reassess capacity, nor cramp the stock-picking style of the managers. It is focused on opportunities in ignored sectors, a style that has turned a $100 investment into $170.81 since launch in April 1999, according to the group. The fund targets absolute annual returns of 10% to 15% on 10% to 12% standard deviation but has achieved 18.4% average annual returns on volatility of 10.5%.

Since inception, it has displayed a 0.25 correlation with the Dow Jones Industrials Index, investing in longs with an average capitalisation of US$4bn, and US$19bn average for shorts to avoid getting caught in short squeezes. Its positions as at the end of June comprised 29% US shorts, 15% Canadian shorts, 27% US longs and 29% Canadian longs.

Clark said the edge of hedge fund managers in Canada over their US counterparts is the anomalies still existing in the smaller Canadian equities landscape.

The existing fund's gross exposure is usually between 90% to 120%, with net exposure generally between '20% and 20%.

Clark, who was vice-chairman of the Toronto Stock Exchange from 1993 to 1997 and on the board of governors from 1990 to 1993, said JC Clark's Dublin- listed fund with Canadian and US dollar and euro share classes, would not follow its US-investor focused fund in being able to leverage up to 150%.

The fund's administration will be performed in Ireland by the Bank of Bermuda, after a listing slated for September.

Minimum investment levels are still to be determined, but fees are 2% management and 20% performance, with high water marks.