Hedge fund betting on post-COVID revival

One of Canada's top hedge fund managers parlayed the pandemic-fuelled turmoil of 2020 into its best performing year in the firm's history. Timelo Investment Management Inc. sees even more opportunity ahead.

The firm oversees Timelo Strategic Opportunities Fund, a seven-year-old fund whose 29-per-cent gain last year outperformed the 5.6 per cent total return of Canada's benchmark S&P/TSX Composite Index. Timelo took advantage of market volatility in the early days of COVID-19 to invest in companies best positioned to weather the pandemic. Now, says portfolio manager JeanFrançois Tardif, the Toronto-based firm is betting on a post-pandemic revival that others aren't seeing yet.

“Things are getting better from here,” Tardif said in an interview. “When COVID is 90-per-cent or 95-per-cent over, which is probably going to be the case by summer, most of the economic damage should be behind us, so I'm looking at stocks that haven't yet fully recovered and should fully recover.”

Timelo, which manages about $400 million in assets, initially saw its performance fall in the turmoil sparked by the pandemic.

“At first there was a panic for everybody, but that created opportunities,” Tardif said. “So we went looking for companies that would make it to the other side, even if COVID lasted three years.”

Those companies included Starbucks Corp., Pizza Pizza Royalty Corp. and others considered to be guaranteed survivors of the pandemic. Those investments will continue to pay off this year, Tardif said. He's now paying attention to the energy sector as well as entertainment and travel.

“Post-COVID, people have been stuck at home for so long, they're going to overdo things outside,” he said. “We're going to more movie theatres, and maybe do more trips to the beach.”

Canadian hedge funds returned 11 per cent last year through November, according to the Scotiabank index, the best performance for the period since 2010. Global hedge funds returned almost 8 per cent, according to data compiled by Bloomberg.

Only three of Canada's 57 hedge funds, or about 5 per cent, posted losses last year, according to Venator Capital Management Ltd., a Toronto-based investment firm.