(Updates with gold investment in sixth paragraph.)
Oct. 4 (Bloomberg) -- Salida Capital LP, a Toronto-based hedge fund that said yesterday speculation of its collapse is “unfounded,” has increased its hedging in energy and other holdings as oil prices fall.
With the potential for oil to head lower “we’ve now raised our level of hedging in both the energy sector and the broad market,” Salida Capital said late yesterday in a report to clients.
Salida told investors in May that commodity prices were in a correction and were poised to rebound. At the time, Chief Executive Officer Courtenay Wolfe said her firm managed about $900 million in assets, focusing on natural resources, with about 50 percent of the investments in Canada.
Salida’s investment calls in mid-August backing oil and gold “have been costly, as the market has moved against us,” the company said in yesterday’s report. “We still believe that the reasoning was logical, but arguably ill-timed. In hindsight, we underestimated the short term impact of forced selling.”
“Not only did the bounce not occur, but the sector has continued to sell off,” Salida wrote, referring to energy stocks. “Sell off is an understatement -- it’s been decimated.”
Salida continued boosting its investment in gold in mid- August, believing the metal to be a “relative safe haven” in the current environment, the fund said.
‘Not Going Anywhere’
The company’s Salida Strategic Growth Fund has dropped 20 percent this year, including a 17 percent drop in the month to the end of August, according to data compiled by Bloomberg. The fund soared 182 percent in 2009. The benchmark Standard & Poor’s/TSX composite index has fallen 16 percent in 2011. Units of its publicly traded Salida Wealth Preservation Listed Fund have dropped 25 percent since April.
Wolfe, who along with Salida representatives paid $1.68 million in 2009 to have lunch in New York with billionaire investor Warren Buffett, said she’s talked to “key” clients and hasn’t seen any recent uptick in fund redemptions.
“Salida is not going anywhere; we’re not blowing up,” she said in a telephone interview yesterday.
Wolfe said speculation that her Toronto-based hedge fund had collapsed is “unfounded,” and may have been started by volatility in the equity markets.
“We’re having a difficult time in the markets, like everybody else,” Wolfe said. “Everybody sees the volatility.”
Canadian stocks fell yesterday, led by energy companies and banks, as Europe’s finance leaders prepared to weigh the risk of a Greek debt default.
The company remains positive on gold.
“The fundamental backdrop for gold has rarely been more compelling,” according to the report. “A bet on bullion is a bet that central banks are about to ramp up money printing -- a logical bet in our view. In fact, we feel safer in gold than anywhere else in today’s market.”
--Editors: David Scanlan, Steven Frank.
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