Calpers, the largest U.S. pension fund, said on Sept. 15, 2014, that it will pull all $4-billion it has invested in hedge funds because it finds them too costly and complicated.Max Whittaker/Reuters
It's been a chaotic year for Toronto-based asset manager Breton Hill Capital Ltd. Around the same time that the firm's big backer, the California Public Employees Retirement System (Capers), decided to exit its hedge fund investments, Breton Hill's head count was halved from 12 to six.
To people on the outside, it may seem as if the fund is struggling to find its way since the Calpers cuts. (The pension fund was an early investor, seeding Breton Hill with $100-million U.S.) But chief investment officer Ray Carroll swears the firm is in good shape, despite the internal changes.
When it comes to staff levels, Mr. Carroll said many of the positions were in operational roles and these people have been replaced by automated systems.
More importantly, Breton Hill has a growth plan. The fund has a small equity stake in Purpose Investments, which specializes in low-fee money management, and the two firms are working together to build that business, with Breton Hill managing a series of exchange-traded funds that offer hedging and alternative strategies relative to standard money management techniques.
Despite the questions on Bay Street about Breton Hill's future, Purpose founder Som Seif said the core of fund's team, which includes Mr. Carroll, is still there. "Nothing's changed in our mind," he said. "Breton Hill as a partner for us has been phenomenal."
The challenge now is to add scale to Purpose's business, because the money management fees it pays to Breton Hill are significantly lower than what Calpers paid. Managing retail-oriented funds also requires thinking about investment strategies in different ways.
But Breton Hill has a game plan, and that's a great starting point. Now it's up to the team to foster growth.
Tim Kiladze