The president of Lawrence Asset Management Inc. made a name for himself running the firm’s flagship hedge fund with stellar returns such as his 75-per-cent gain in 2007.  But the stock market crash has dealt a blow to Lawrence Partners Fund, which suspended redemptions this week after plunging 65 per cent for the first 10 months of this year.

The investment firm “believes it is in the best interests of all shareholders to suspend redemptions for 60 days,” the 32-year-old manager told investors in letter on Monday. “We are reviewing the situation and expect in the upcoming weeks to present to LPF shareholders a number of alternatives.”

Mr. Sood is the latest victim among Canadian hedge funds caught in the market turmoil.  Falling stock markets are forcing many hedge funds to wind down or undergo a makeover.  “Certainly we are going to see more hedge funds suspend redemptions to meet an orderly request of unitholders who want their money,” said fund analyst Peter Loach. “A lot of hedge funds focus on small-cap stocks, and they have been hit the hardest.”

Last month, Toronto-based Epic Capital Management Inc. said it was closing its flagship Epic Limited Partnership hedge fund after assets sank to $200-million from $300-million.

Lawrence Partners Fund’s options could include winding down. They could also include cutting the management fee for investors willing to stay, sources say, or allowing some investors to pull out if they agree to a further loss on their investment in return.

The past two months have been challenging for Mr. Sood, a precocious student who completed high school at age 16. He joined Toronto-based Lawrence & Co. after graduating with a math degree from the University of Waterloo.

This is the firm founded by legendary Bay Street bond trader Jack Lawrence who built the former Burns Fry into a powerful investment dealer. It boasts blue-chip names such as John Crow, former governor of the Bank of Canada, and Paul Volcker, former chairman of the U.S. Federal Reserve Board, on its advisory board.  With his partners at Lawrence & Co., Mr. Sood founded Lawrence Asset Management as a subsidiary in 2001.

His hedge fund, which invests in smaller-capitalization Canadian stocks and has private equity holdings, saw its stellar track record unravel in September when it took a 48-per-cent haircut. The fund, which had about $217-million in assets in late March, lost more money last month.

Mr. Sood could not be reached for comment, but he told investors in his letter that the fund’s poor performance was also affected by the credit crisis. He “was forced to adjust on little notice to more restrictive credit terms in an already problematic market.”

Sources close to Lawrence Partners say the fund’s prime brokers at BMO Nesbitt Burns and CIBC World Markets cut back on their loans, and that forced the fund to sell holdings in takeover targets Fording Canadian Coal Trust and BCE Inc. at a loss.

The fund was also “negatively impacted” by the delay in closing and lowered pricing in the acquisition of PBS Coals – a major holding – by OAO Severstal, Mr. Sood wrote.

So with Hedge Funds drastically plummeting, where should you turn for safer, more secure investments?

The MBN (7-1) Bond Fund offers the security you are looking for, with the return you want.  It is an RSP eligible bond that provides a 7.0% annual fixed rate of return compounding over a 4 year period, which provides an annualized rate of return of 7.7%.  This fund, unlike most other funds, is Hard Asset Backed, meaning it is secured to real estate which is a tangible asset.  Hard Asset value offers an objective measure of value, based largely on supply and demand economics (market forces) and the law of substitution.  All of these factors, when combined, make for an extremely secure investment and create the asset backed investment, rather than stock backed investment, that most Canadian Financial Institutions are comfortable lending on.  Ask yourself this: What do most of the Major Banks lend on: Real Estate or Stocks?   The answer is Hard Asset Backed Mortgages, or Real Estate.

With the MBN Bond Fund the principal is backed by real estate and the interest is covered by a performance bond.  This gives you peace of mind with regards to the security of your investment.

By transferring your registered investments to the MBN Bond Fund there are no tax implications to be had as you are moving your investments from one Registered Fund to another; you are not relying on consumer confidence to increase the value of your stocks; and you are removing the market volatility that has caused the decrease in your investments.

By doing your research and being a knowledgeable investor you can protect your investments; your lifestyle, your children’s college funds, and your retirement income.  Your investments are too important to leave to chance.  Contact your MBN Bond Fund Specialist at 1-877-212-8002 or www.mbnbondfund.com to learn about how you can transfer your Registered Investments and begin earning a fixed 7% rate of return.

In addition to the Bond Fund, MBN offers a financing team with Mortgage Associates specialized in first-time home buyer financing and investment property financing. 

To learn more about your mortgage options please contact your Calgary and Southern Alberta Mortgage Specialists at MBN Mortgage at 1-866-955-9662 or http://www.mbnmortgage.com

MBN Mortgage

Globe And Mail

Nov 11, 2008

So why did Ottawa agree to insure the money they routinely borrow from other banks, a practice that keeps their credit operations liquid? Ironically, the troubled non-Canadian institutions that received capital injections and loan guarantees in other countries now carry a government seal of approval that tilts the playing field in their favor when it comes to borrowing. That leaves Canada’s big banks, including Scotiabank, TD Bank Financial Group, RBC Royal Bank and CIBC, at a competitive disadvantage. So the government acted to level the field, not to aid troubled banks.

Why has Canada withstood the subprime tornado better than other countries, and should the Canadian banking system be a model for G-7 and G-20 leaders when they gather in Washington on Nov. 15? Consider that the Geneva-based World Economic Forum, an influential think tank whose annual conference attracts the likes of Bill Gates and Tony Blair, earlier this month ranked Canada’s banking system as the soundest in the world. The U.S. came in at No. 40, and Germany and Britain ranked 39 and 44, respectively. (Switzerland was No. 16, just ahead of Namibia.) “For Canadian banks, having higher capital ratios than anyone else in the world is a source of pride,” says analyst Mario Mendonca with Toronto-based investment bank Genuity Capital Markets.

The average capital reserves for Canada’s Big Six banks — defined as Tier 1 capital (common shares, retained earnings and non-cumulative preferred shares) to risk-adjusted assets — is 9.8%, several percentage points above the 7% required by Canada’s federal bank regulator. That’s a little better than major U.S. commercial banks like Bank of America, but significantly higher than an average capital ratio of about 4% for U.S. investment banks and 3.3% for European commercial banks.

Another factor that helped make Canada the new gold standard in banking was Ottawa’s decision in the late 1980s to allow commercials banks to acquire investment dealers on Toronto’s Bay Street, the country’s financial hub. As a result, these institutions are subject to the same strict rules as commercial banks, while U.S. investment dealers are subject to only light supervision from the Securities and Exchange Commission. Morgan Stanley and Goldman Sachs, of course, will now be under the U.S. Federal Reserve’s supervision since they have been chartered as bank-holding companies.

Canada’s banks make bad investments on occasion. When Toronto-based CIBC, Canada’s most aggressive big bank, took $3.5 billion in charges against the U.S. subprime debacle, federal regulators quickly arrived on the scene. But here’s the difference: CIBC ended up selling $2.94 billion worth of its own shares in the first quarter of this year to shore up capital reserves. “The relationship between government and banks is a positive one,” says Minister of Finance Jim Flaherty. “We have a lot of discussions and regular meetings. The common goal is a sound financial system.”

There is, of course, a flip side to Canada’s regulatory system. When the global economy was flying high, Canadian banks complained about not being allowed to merge to become more significant international players. “In hindsight, that decision may have saved Canada from having a Royal Bank of Scotland on its hands,” says Lawrence Booth, a finance specialist at the University of Toronto’s Rotman School of Management, referring to the overly ambitious bank’s bailout earlier this month by the British government.

Says FFlaherty: “The credit crisis we’re facing is the result of unbridled greed. We need to bridle greed.” Perhaps when world leaders sit down in Washington to forge a 21st-century New Deal for the global financial system, it may have more than a smattering of Canadian banking know-how.

MBN Mortgage

TIME

Monday November 10, 2008