CIBC Exits Canadian Retail Hedge Fund Product

by Mike Godfrey, Investors Offshore, New York

04 April 2002

CIBC World Markets, which has been trying to develop the retail market for hedge funds in Canada, has withdrawn 'for the time being' its Advantage Advisers Multi-Sector Trust, but says it remains confident about the long-term prospects for retail hedge-fund investment in Canada.

CIBC World had planned to raise a minimum of US$50 million from the Trust offering in Canada. The units were priced at US$25 each, and participants were required to make a minimum investment of US$2,500. The assets were to be allocated by CIBC World among three money managers, each of whom would use hedge fund strategies to invest in one of three main industry groups: biotechnology, financial services and technology.

CIBC World had previously raised about about US$90 million through a similar unit trust issue in the US, but found Canadian demand to be relatively weak, in part because of investors' continued appetite for investments in income trusts or other types of products structured primarly to produce income, said Robert Penteliuk, executive director financial institutions at CIBC World Markets in Toronto. "The market continues to stay focused on income...and rather than continue to fight an uphill battle we decided to pull the deal," Penteliuk said.

CIBC World is however still involved in the hedge fund asset class for retail investors as co-lead underwriter of the iPerform Strategic Partners Hedge Fund, another investment trust being marketed to retail investors in Canada. The units are priced at C$10 each and investors are required to make a minimum investment of C$5,000. The trust is aiming to raise around C$100 million.

iPerformance's ongoing marketing effort for its hedge fund product was another reason CIBC World withdrew its trust offering. "We didn't want to be in the market with two deals at the same time competing against each other," Penteliuk said.

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