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TORONTO (Reuters) - Lawrence Park Capital Partners aims to manage C$200 million ($203 million) in assets by the end of next year after reaching C$36 million with the launch last month of its flagship credit-focused hedge fund, Chief Executive David Fry said on Wednesday.
"We'd like to be at C$100 million by year end. I'm reasonably confident that we'll get there, probably double that for the end of 2013," Fry said in an interview at the company's offices in an converted knitting factory.
Fry, who co-founded the Toronto-based hedge fund manager with fellow TD Securities veteran Andrew Torres, thinks the firm's focus on fixed-income investing will help it stand out in a Canadian hedge fund sector that is much smaller than those in centers like New York, London or Hong Kong.
Lawrence Park's profile received a major boost in February when one of Canada's largest mutual fund managers, CI Financial Corp (CIX.TO), said it would seed the start-up and take a "significant" minority ownership stake. It also plans to market the fund to its wealthier clients.
Lawrence Park's four partners have all worked on proprietary trading desks outside Canada for lenders include Toronto-Dominion Bank (TD.TO) and ABN Amro, with a focus on trading credit products.
Many banks are winding down these types of operations because of the Volcker rule, mandated by the 2010 Dodd-Frank financial reform law, that aims to ban banks from trading with their own funds to prevent the kind of risk-taking that helped trigger the global financial crisis.
"Those types of activities at most global banks are going the way of the dodo essentially," Fry said, noting that reduced competition from banks created more trading opportunities for hedge funds.
"Our thought really is that we can take that strategy ... and put that in a product that we can deliver to Canadian investors who are, from we can tell, generally starved of alternative fixed-income products."
Lawrence Park's Credit Strategies Fund, which gained 0.53 percent in its first month of operation, uses arbitrage and other trading strategies to try to make gains in both rising and falling markets. Recent trades included an investment in Ford Motor Co's (F.N) Canadian-dollar debt ahead of an upgrade by Fitch.
But the fund's managers say only roughly a fifth of trades are focused on the Canadian credit space, and there are more opportunities in the deeper and more liquid U.S. and global markets.
Within Canada, Chief Investment Officer Torres sees good value in the debt of some Canadian cable operators, which is priced more cheaply than cable company bonds in other markets.
The fund also takes short positions, borrowing then selling some debt issues in expectation they can be bought back later at a lower cost. Torres said there are shorting opportunities in the debt of some entities sponsored by provincial governments, which he see as pricey given fiscal challenges.
The fund has also bought the debt of some U.S. and U.K. banks, which has cheapened up on concerns about the economic outlook but could do well in a recovery. The fund sees less appeal in more expensive Canadian bank debt.
"Canadian banks right now are (priced) very tight. It's not that we don't like Canadian banks, but we just think that there's not a lot of compelling reason to add to our global banking exposure through the Canadian banks," Torres said.
($1 = $0.9852 Canadian)
Editing by Janet Guttsman