| TORONTO, June 25
TORONTO, June 25 John Stephenson, a prominent
Toronto-based money manager, said on Wednesday he plans to
launch his own hedge fund, a vehicle he thinks will be
best-placed to take advantage of potential volatility in stock
markets trading near record highs.
A former executive at First Asset Investment Management,
Stephenson expects his first product to be a C$40 million
($36.86 million) North America-focused fund. He hopes to follow
that up with other offerings and sees the money manager playing
an activist role in corporations over time.
The long/short Stephenson & Co North American Opportunity
Fund LP, which is likely to be launched in August, will
initially be weighted heavily toward the U.S. market.
Stephenson believes the U.S. economy is on a firmer footing
than its Canadian counterpart.
"The U.S. consumer has dug themselves out of a hole, whereas
we continue to dig ourselves into a hole. That's just the
reality," he said.
The Toronto Stock Exchange's benchmark index has
gained about 27 percent in the last year, and many investors are
worried about valuations becoming extended and the risk of a
"In the last few years, it probably hasn't mattered if you
had alternative investments or not because the market was going
straight up," said Stephenson, author of "The Little Book of
"You really want a hedge fund when things are choppy," he
said. "You want the manager to be able to hopefully turn in
positive performance in bad markets. That's the idea."
Stephenson says while valuations in some parts of the market
are becoming stretched, shares of large U.S. banks such as
Citigroup Inc, JPMorgan Chase & Co and Bank of
America Corp were appealing, given the prospect of solid
returns and steady dividends.
"They are the most hated group in the market. It's maximum
pessimism. But their valuations are incredibly compelling."
He also favors Canadian energy stocks, with his top picks
including Suncor Energy Inc, Canadian Natural Resources
Ltd, Whitecap Resources Inc and Crescent Point
"We're into an era of stronger oil prices for at least a
number of months," he said.
"Energy is highly linked to global economic growth. And in a
world where growth is fairly strong and getting stronger, you're
seeing investors start to come back in to energy."
($1 = 1.0853 Canadian dollars)
(Editing by Jeffrey Hodgson and Matthew Lewis)