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Hedge Fund Awards 2015

Best Opportunistic Hedge Fund - Canada

Donville Kent Asset Management Fact File

Company: Donville Kent Asset Management Name: Jordan Zinberg Email: jordan@donvillekent.com Web Address: donvillekent.com

65 Toronto-based Donville Kent Asset Management Inc’s DKAM Capital Ideas Fund LP invests long and short in a concentrated group of Canadian-listed public companies. Jordan Zinberg, Managing Director and Portfolio Manager, told us about the fund’s strategy. Donville Kent Asset Management Inc. (DKAM) is a highly specialised asset management firm that manages investments on behalf of individual investors as well as select institutions. Through the application of a focused investment strategy, DKAM searches for companies that possess high levels of return on equity, reasonable valuations and positive share price momentum. One of the firm’s funds, the DKAM Capital Ideas Fund LP, invests long and short in a concentrated group of Canadian-listed public companies. “We are agnostic to market cap, and invests across all sectors,” says Jordan Zinberg, Managing Director and Portfolio Manager. “We search for companies that possess high levels of return on equity, reasonable valuations and positive share price momentum. Portfolio companies typically have a track record of achieving high returns on equity, and are capable of generating high returns on equity for many years without the addition of significant amounts of equity capital, other than that which is being generated internally. These companies are run by strong management teams that have a significant ownership stake in the business.” The DKAM Capital Ideas Fund LP has been named Best Opportunistic Hedge Fund – Canada in this year’s Hedge Fund Awards. “The entire team at Donville Kent is extremely proud of this achievement,” says Zinberg, “and we continue to apply our disciplined investment process in the quest for superior returns for our investors.”

There is a common perception, says Zinberg, that hedge fund managers employ highly complicated strategies and trade frequently. “I’m not sure that this perception has changed much in recent years. However, in Canada, the hedge fund industry is highly regulated, and as a result has been able to avoid some of the problems that have occurred with hedge funds in other countries. In our case, our investment approach is relatively simple and we tend to hold positions for many years. Several of our current top holdings have been in the portfolio since inception.” Canada’s hedge fund industry is on the rise, says Zinberg, although he notes that the larger firms are enjoying the most success. “Based on the data I have seen, the hedge fund industry in Canada is growing in terms of industry AUM, however the number of firms has declined over the past five years. As I would suspect is consistent with other markets, it is the largest funds that are attracting the majority of the assets. When you combine that trend with the increased costs of compliance, it is becoming more and more difficult for smaller firms to survive.” Nevertheless, there are several unique circumstances that make Canada a great place to be an active manager, says Zinberg. “In our view, equity markets can either be efficient, semi-efficient or inefficient. Canadian equity markets are semi-efficient and thus once you move beyond the resource names and the largest companies in the country, there exists a group of superb companies that are relatively underfollowed by the investment community. We have found there to be some significant dislocations in valuation within this group that you would not find if these companies were listed in a highly efficient market like the US.” n

“We believe we have been recognised for our ability to produce not only attractive absolute returns, but very good risk-adjusted returns as well. We are quite proud of the fact that we have been able to outperform the Canadian equity markets (as measured by the S&P/TSX Composite Total Return Index) every year since the fund inception (1 October 2008).”

Paul J. Isaac, CEO and Founder of Arbiter Partners, tells us about the firm’s tried-and-tested approach to investing.

Best Long-Short Hedge Fund (3 Years)

Arbiter Partners

Arbiter Partners is a New York-based value long/short fund. The strongest part of the firm, says Paul J. Isaac, CEO and Founder, is “a diversified investor base that is largely tax sensitive which has a consistent time horizon with their investment approach.” Isaac says it was “a pleasant surprise” to be named Best Long-Short Hedge Fund (3 Years) in the Acquisition International Hedge Fund Awards. Such awards give firms somewhat better visibility, he says. We find the current artificiality of the interest rate environment perplexing in its effects on the equity market” As 2014 comes to a close and we move into 2015, Isaac says long/ short structures need to justify themselves in the face of a general bull market, greater institutional participation and less favourable tax treatment on individual investors.

Fact File

Hedge fund managers have traditionally been seen by people outside the industry as possessing a certain aura. This, says Isaac, is changing. “There has been a distinct tiering of the mystique,” he says, “with only some of the larger investors maintaining their mystique.” As for the coming year, Isaac says Arbiter has few specific plans, other than to stick to its proven formula. “We’ll keep plugging away at our basic approach,” he says. n

Name: Paul J. Isaac Email: pisaac@arbiterpartners.net Web Address: www.arbiterpartners.net Address: 11 East 44th Street, Suite 700, New York, NY 10017 Telephone: +1 212 650 4670

www.acquisition-intl.com

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