Top Canada Hedge Fund With 29% Return Bets on Reopening Trade

By Paula Sambo

January 28, 2021, 5:00 AM MST

Photographer: ROMEO GACAD/AFP

One of Canada’s top hedge fund managers parlayed the pandemic-fueled turmoil of 2020 into its best performing year in the firm’s history. Timelo Investment Management Inc. sees even more opportunity ahead.

The firm oversees Timelo Strategic Opportunities Fund, a seven-year-old fund whose 29% gain last year outperformed the 5.6% total return of Canada’s benchmark S&P/TSX Composite Index. Timelo took advantage of market volatility in the early days of Covid-19 to invest in companies best positioned to weather the pandemic. Now, says portfolio manager Jean-Francois Tardif, the Toronto-based firm is betting on a post-pandemic revival that others aren’t seeing yet.

“Things are getting better from here,” Tardif said in an interview. “When Covid is 90% or 95% over, which is probably going to be the case by summer, most of the economic damage should be behind us, so I’m looking at stocks that haven’t yet fully recovered and should fully recover.”

Pandemic Panic

Timelo, which manages about C$400 million ($313 million) in assets, initially saw its performance fall during the turmoil sparked by the pandemic. Canada’s benchmark S&P/TSX Composite Index reached a record high in February before tumbling a month later amid the virus outbreak.

“At first there was a panic for everybody, but that created opportunities,” Tardif said. “So we went looking for companies that would make it to the other side, even if Covid lasted three years.”

Those companies included Starbucks Corp., Pizza Pizza Royalty Corp. and others considered to be guaranteed survivors of the pandemic. Those investments will continue to pay off this year, Tardif said. He’s now paying attention to the energy sector as well as entertainment and travel.

“Post-Covid, people have been stuck at home for so long, they’re going to overdo things outside,” he said. “We’re going to more movie theaters, and maybe do more trips to the beach.”

Canadian hedge funds returned 11% last year through November, according to the Scotiabank index, the best performance for the period since 2010. Global hedge funds returned almost 8% last year, according to data compiled by Bloomberg.

Only three of Canada’s 57 hedge funds, or about 5%, posted losses last year, according to Venator Capital Management Ltd., a Toronto-based investment firm that manages funds and tracks the industry.

Here’s a roundup of Canadian hedge-fund performance last year, as compiled by Venator:

Venator Founders Fund 48.6%
Venator Investment Trust 48.5%
MMCAP Canadian Fund 46.4%
HGC Arbitrage Fund LP 38.0%
Venator Select Fund 37.6%
EHP Select Alternative Fund 32.2%
Timelo Strategic Opportunities Fund 28.6%
Purpose Select Equity Fund 28.0%
NewGen Equity Long-Short Fund 25.5%
Polar Micro-Cap Fund 24.7%