Calgary-based hedge fund company Kootenay Capital Management Corp. is shutting down its Global Energy Absolute Return Fund.
In a letter to unitholders, the company said "it intends to dissolve the partnership on or about January 10, 2015, and return capital to its unitholders."
Kootenay cited "a period of challenging investment conditions for natural resource investors" and difficulties in attracting fresh capital. The size of the fund is said to be in the $25-million range.
The Global Energy Absolute Return Fund is a long-short hedge fund that invests in the energy sector. It was launched in July 2011 by Chris Theal, former global head of oil and gas research at Macquarie Securities, and a former officer with the Canadian Navy (Kootenay is named after the HMCS Kootenay, a destroyer on which Mr. Theal served).
It has been a challenging couple of months for the fund; it was down 4 per cent in Sept. and down 8 per cent in Oct., according to data on the company's website.
In a telephone interview, James Burron, chief operating officer, with the Alternative Investment Management Association Canada (AIMA Canada) said that energy-only hedge funds represent about 5 per cent of the $34-billion invested in hedge fund assets in Canada. Commenting on a number of recent fund closures in the Canadian hedge fund industry, Mr. Burron said that the closures were nothing out of the ordinary. He noted that a new hedge fund typically opens every four to six weeks in Canada.
The Scotiabank Canadian Hedge Fund Asset Weighted Index, which tracks hedge funds that have been around for at least a year, and have $15-million or more under management, was up 4 per cent as of the end of Oct, underperforming the S&P/TSX Composite Index which was up 6 per cent during the same period.
The energy sector though, where Kootenay was invested, has been particularly hard hit this year. The S&P/TSX Capped Energy Index is down 29 per cent in 2014.
Calls to Mr. Theal were not returned.