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In this issue:

  • 2007 Canadian Investment Awards Finalist
  • Manager Profile: SD Baker
  • BluMont acquires two
    new funds
  • BluMont News
  • Industry News
  • Hedge-o-pedia

BluMont News

BluMont Augen Limited Partnership 2007-1 Completes Closing Of Flow-Through Offering Raising Over $16 Million CAD
(November 1, 2007)

Industry News

Is your mutual fund an overpriced long/short hedge fund?

Article Summary

Mark Noble wrote an article for the November 20, 2007 edition of the advisor.ca bulletin titled “Is your mutual fund an overpriced long/short hedge fund?”
 
The article makes the point that many investors who view hedge funds as overpriced and risky vehicles for wealthy investors would be surprised to find that hedge funds might actually be a cheaper and less volatile alternative to most equity mutual funds.
 
The author cites recent comments by Chris Holt of Holt Capital Advisors that the actively managed portion of many equity mutual funds resembles a long/short hedge fund that is embedded in a larger indexed portfolio.   Holt, says the majority of mutual fund returns are “beta” – meaning they are heavily dependent on the performance of the market – with a small “alpha”-generating portion – the part dependent on manager skill – layered on top. 
 
Although regulations deter equity mutual fund managers from shorting, Holt says, they still tend to use underweighting a particular sector or stock in a similar fashion to shorts. Like a short position, underweighting a sector or stock is essentially betting a sector or stock has an inflated market value.  After removing the beta-generating portion, what an equity mutual fund is basically left with are overweight and underweight sectors or stocks that resemble a long/short hedge fund.
 
This typical equity mutual fund structure could be duplicated by (1) replacing the larger beta portion of the equity mutual fund by a much cheaper ETF or "Exchange Traded Fund" (which is index-linked rather than actively managed), and combining it with (2) a smaller allocation to a long/short hedge fund to obtain the alpha portion.  Because the long/short hedge fund allocation would be relatively small in comparison to the ETF portion, the total fees for this combination when pro-rated, could be much cheaper than a standard equity mutual fund. 
 
Using this logic, Holt says long/short hedge fund fees start to look like a bargain in comparison.

BRIC may cure any resource sector ills

BluMont’s Chief Investment Officer and lead portfolio manager of the Hirsch Performance Fund, Veronika Hirsch, was recently interviewed for the Globe and Mail’s Best Bets column. 

Ms. Hirsch stated that despite what is occurring in the US, that the Canadian resource sector will continue to be buoyed by growth in the so-called “BRIC” countries.  BRIC is an acronym for the emerging market economies of Brazil, Russia, India and China.  Ms. Hirsch asserts that the growth in BRIC countries and their growing middle classes should drive demand for metals used for infrastructure projects and gold for jewellery.  According to Ms Hirsch, these countries will still buy Canadian resources regardless of what happens in the US.  In the US markets have been in turmoil due to a credit crunch triggered by the collapse of the subprime mortgage market and fears that a possible US recession will crimp corporate profits.
 
Click here to view the complete article.

Hedge-o-pedia

Top-Down investing

An investment approach that involves looking at the "big picture" in the economy and financial world and then breaking those components down into finer details. After looking at the big picture conditions around the world, the different industrial sectors are analyzed in order to select those that are forecasted to outperform the market. From this point, the stocks of specific companies are further analyzed and those that are believed to be successful are chosen as investments.

Issue 38 - December 11, 2007.

We hope you enjoyed reading BluMont eNews. You can expect our next issue in January.

BluMont eNews is a monthly email publication.

We want to hear from you. Send us your comments or questions and let us know what you want to see in BluMont eNews.

Email: feedback@blumontcapital.com

Fund Performance as of November 30, 2007

Fund Name

CDN$
NAVPS

% chg vs
prev mnth

YTD
(%)

BluMont Canadian Opportunities Fund

166.71

-2.48

4.05

BluMont Hirsch Long/Short Fund

178.02

-4.38

7.60

BluMont Hirsch Performance Fund

28.18

-4.81

11.12

BluMont Core Hedge Fund

113.51

-0.10

9.10

Man-IP 220 S1 Notes*

15.08

6.02

14.79

Man-IP 220 S2 Notes*

14.45

6.20

15.40

Man-IP 220 S3 Notes*

10.78

6.40

14.87

Man-IP 220 S4 Notes*

11.21

5.99

12.97

Man Multi-Strategy, S1*

11.81

3.22

2.05

Man Multi-Strategy, SA*

12.04

3.44

1.83

Man Multi-Strategy, S2*

11.69

3.21

2.01

Man Multi-Strategy, S3*

12.58

3.32

1.92

Man Multi-Strategy, S4*

11.70

3.20

2.04

Man Multi-Strategy, S5*

11.27

3.00

1.14

* As of October 31, 2007

Click to view full fund performance and pricing tables.

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2007 Canadian Investment Awards Finalist

BluMont Capital would like to congratulate Veronika Hirsch on her signature fund, the BluMont Hirsch Performance Fund being granted the Finalist award in the Opportunistic Strategy Hedge Fund category at the 2007 Canadian Investment Awards.

The award process is extremely comprehensive with independent juries reviewing both quantitative performance as well as qualitative factors such as management quality, availability and fee structure.  

The BluMont Hirsch Performance Fund (the “Fund”) is a unique Canadian equity fund, offering enhanced profit potential with no management fee. Investors only pay for positive performance, which truly aligns the interests of the Investment Advisor with the investor's interests. A 20% performance fee is applied only when the Fund delivers a net return in excess of a perpetual high watermark.¹

Veronika Hirsch, lead Portfolio Manager to the Fund, is a veteran of the Canadian investment management industry with over 25 years experience and is recognized as one of Canada’s premier equity investment managers.  

The Canadian Investment award is a testament to the decade of proven performance of the BluMont Hirsch Performance Fund under the helm of experienced investment manager, Veronika Hirsch.

Click here for more information on the BluMont Hirsch Performance Fund or contact BluMont Capital at 416-216-3566 / 1 - 866-473-7376 or via email at service@blumontcapital.com.

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Manager Profile:  SD Baker

SD Baker & Associates Inc. ("SD Baker") is a Toronto based, discretionary money management firm focused on balanced and absolute return portfolio strategies.  SD Baker is the Investment Advisor to the BluMont North American Opportunities Fund.

SD Baker strives to produce consistent returns for Canadian investors. They seek to maximize long-term returns while minimizing business, economic and market risks. They treat your money as they would their own, and they are invested alongside their clients at all times. 

Scott Baker, CFA is the founder and President of SD Baker. Mr. Baker has extensive experience in managing US and Canadian portfolios for high-net-worth investors and pension funds including 10 years as an analyst and portfolio manager with Connor Clark of Toronto and Connor Clark & Lunn of Vancouver.

Andrew Cumming, Ph.D is a Partner of SD Baker. Dr. Cumming earned his Ph.D in Physics from M.I.T. and completed his postdoctoral work at Bell Labs in New Jersey. He returned to Canada to run trading businesses in equity derivatives at Citibank, Deutsche Bank and most recently Scotiabank, where he was Managing Director and Head of the Equity Related Products group.  Dr. Cumming has extensive experience in modeling, trading and risk management.

SD Baker are active 'stock pickers' who have developed a disciplined and proven approach to security selection. Their mandate is to invest in a concentrated portfolio of securities with above-average long-term prospects.

SD Baker, uses a proprietary database designed to uncover under-researched investment opportunities with the potential to deliver superior returns. SD Baker reviews investments that provide exposure to identified global themes.

Once identified, SD Baker takes a hands-on approach using quantitative and qualitative analysis to determine the investment viability of the company.  This process includes consideration of the following: 

Management Team : Companies with management teams with a successful track record managing firms and increasing shareholder value.

Operating Earnings : Companies with the potential to generate above-average operating earnings.

Assets : Companies that have undervalued assets on their balance sheet.

Time Horizon : Investments that can reasonably expect to deliver returns in two to three years.

Strategic Value : Companies that present the opportunity to be acquired at a premium by a third party.

Click here for more information on the BluMont North American Opportunities.

BluMont acquires two new funds and plans an expanded product lineup

BluMont Capital is pleased to announce the acquisition of the Halcyon Hirsch Opportunistic Canadian Fund and Halcyon Hirsch Opportunistic Tactical Allocation Fund from Halcyon Fund Management Inc. and Burgeonvest Securities Limited.  BluMont Capital now handles all administrative management contracts for the funds.

As part of the transaction, and prior to closing, the Halcyon Canadian Demographic Fund was merged into the Halcyon Hirsch Opportunistic Tactical Allocation Fund. The closing of the transaction was approved at a unitholder meeting held on October 12, and was approved by applicable regulatory authorities on November 6.

With a change of manager, the funds have new monikers - the BluMont Canadian Fund - formerly the Halcyon Hirsch Opportunistic Canadian Fund and the BluMont North American Fund – formerly the Halcyon Hirsch Opportunistic Tactical Allocation Fund. 

As stated by Paul Perrow, President and Chief Executive Officer of BluMont Capital, "This is another important step in our strategy to expand BluMont Capital's product line and make widely available, by means of prospectus, access to top investment management teams. These new funds are the foundation of a unique fund family. We intend to add other funds, strategies and managers to the roster."

Click here to view the full press release.

Past performance is not indicative of future results.

¹The BluMont Hirsch Performance Fund does not charge a management fee. However, all fees and operating expenses incurred by the Fund will be payable by the Fund, and the Fund does charge a performance fee equal to 20% of the increase in Net Asset Value of the investment of each unitholder of the Fund. In the event, that the performance fee in any period is negative, the negative amount will be carried forward and deducted from any positive performance fee in respect of the unitholder’s investment in future periods. As such, the performance fee will be based on a “high watermark” for the investment by each unitholder.

This communication is not, and under no circumstances is to be construed as, an invitation to make an investment in the BluMont Funds nor does it constitute a public offering to sell the any of the Funds described herein. Applications for the BluMont Funds will only be considered on the terms of the Offering Memorandum ("OM"). Terms defined in the OM shall have the same meaning in this material. Each purchaser of the Units may have statutory or contractual rights of action under certain circumstances as disclosed in the OM. Please review Schedule A  to the OM or provisions of the applicable securities legislation for particulars of these rights. Potential investors should note that alternative investments can involve significant risks and the value of an investment may go down as well as up.