Arrow Capital Management
In good and bad times, proper investment management makes your capital work for you, and particularly in turbulent economic times, an intelligently diversified portfolio can provide risk controls to help protect capital. Over the last few years, when many investors are getting whiplash from the vicissitudes of the market, Arrow Capital Management has garnered attention for its unique portfolio approach to investing.
The Toronto-based investment firm, with offices in Calgary and Vancouver and affiliate offices in Geneva, Switzerland and London, UK, Arrow Capital Management, formally Arrow Hedge Partners, was born out of founder Jim McGovern’s extensive industry experience.
McGovern co-founded and ran BPI Financial Corp. for 13 years until 1999, when C.I. Fund Management Inc. acquired BPI in a $206-million friendly takeover. A prescient McGovern started Arrow which has since helped define the Canadian hedge fund landscape.
Although Arrow is set up and structured in the same manner as any other Canadian mutual fund company, it is unique in its exclusive focus on actively managed portfolios, commonly referred to as hedge funds. Arrow’s management team is a very experienced group, and after 12 years in a relatively young Canadian hedge fund industry, Arrow is considered one of the “grandfathers” in the business.
“The Canadian industry is still small on a global basis, and locally there are simply no other Canadian based firms with a combination of Arrow’s unique platform, scope of hedge fund products and level of management experience,” says Managing Director and COO Rob Parsons.
Arrow’s expertise in active portfolio management and manager selection is evident in its strong, diverse platform, which provides its clients with access to a global selection of outstanding alternative investment funds. One of the more experienced alternative investment fund companies in Canada and with an extensive network of global resources, Arrow has successfully navigated its clients through all types of market conditions. Arrow is a founding member of AIMA Canada (Alternative Investment Management Association) and is a substantial co-investor in its own funds.
With 32 employees managing over $1.2 billion in assets on behalf of high-net-worth and institutional investors globally, Arrow Capital actively manages various funds that are tailored to meet a variety of performance and capital protection criteria. Capital protection is the paramount driver behind Arrow’s investment philosophy, which ultimately drives the goal of providing funds that offer consistent, uncorrelated returns with lower volatility.
“The volatility of simply buying and owning bonds or stocks in volatile markets like we have been experiencing lately, is that investors are directly exposed to the market roller-coaster ride, which for most people, is not a pleasant experience,” says Parsons. “The best way to run money is to have some sort of process to hedge your exposure to the markets in order to reduce your risk, all the while attempting to capture positive returns and ultimately reducing the portfolio’s volatility. This was the concept behind original hedge fund when it was created by Alfred Winslow Jones back in 1949.
“You have to be more nimble nowadays, and there are smarter ways to run and protect your money than the old ‘buy and hold’ concept. At Arrow, we provide what we believe is a better model, which is an active and intelligent way to manage one’s investments.”
Arrow has 16 different funds that are available for purchase, either directly by high-net-worth investors, family offices and institutions, or through professional investment advisers, who add them into their client portfolios as part of an intelligent investment management strategy. Typically, Arrow funds represent a piece of a portfolio in a proper asset allocation model. Arrow’s broadly diverse group of funds can be employed based on the unique objectives and needs of individual clients. Some of the funds are best suited as replacements for long-only equity or bond funds, while others are better suited as diversifiers for a traditionally balanced portfolio.
“Active management means there is in fact regular trading going on within the portfolios,” says Parsons. “In some cases our managers make calls on market direction, and in other cases want to keep their market exposure neutral and will use active counter bets to reduce risk.” These decisions are often based on in-depth analysis on individual companies and the portfolio manager will select their investments, either long or short, based upon their due diligence.
Risk Management is also a fundamental part of the portfolio process. As such, Arrow has 100 per cent transparency of all of the various funds on its platform, and has an experienced and dedicated risk management team that monitors the funds activity on a daily basis.
Is this turbulent economy drawing people to investments?
In Parsons’ words, yes. “I think investors are concerned about what happened in 2008 happening again. During that bear market any exposure to equities left investors experiencing significant draw downs, with global equity markets dropping anywhere from 40 to 60 per cent, and we are still not back to the peak reached in 2008. For investors, particularly those approaching retirement, the concept of potentially losing a significant portion of their savings at this point is a very scary concept. The bond market is also not without its risks right now either. Interest rates are at historic lows, which makes investing for income a challenge, not to mention the risk that as interest rates rise the value of a bond decreases, so investors can experience capital losses with straight bond investments in a rising rate environment.”
Arrow aims to give clients a “hedged bet” against the market vicissitudes through tempered and diverse products designed to protect capital or potentially make money even in a raising interest rate environment.
It is a natural fit for a company in the business of protecting and securing assets to work with the community at large to protect and secure a future for causes that need patrons. Arrow takes this role very seriously, and has a very involved philanthropic department which every year does a great deal for its beneficiaries.
Arrow is an active participant with Hedge Funds Care Canada, which raised over $225,000 at its annual gala in early November for the prevention and treatment of child abuse. Arrow works closely with children’s charities such as the Teddy Bear Foundation and Sick Kids Hospital, as well as the MS Society. Should you head into the an Arrow office this month and see a high ratio of moustaches, please be reassured that Arrow is a supporter of Movember, the month formally known as November, the moustache growing charity event in support of prostate cancer initiatives.