James Wanstall, recently appointed CEO at Toronto-based BluMont Capital Corp., is on a mission to bring alternative investment strategies such as hedging and short-selling to retail investors in Canada. BluMont’s strategy is to offer not only hedge funds but a family of mutual funds that embrace hedge fund strategies, which traditionally have been available only to institutional and high net-worth investors.

“Alternative strategies are just as important for retail investors as they are for the Ontario Teachers’ Pension Plan,” says Wanstall, a fit 45-year-old whose accent reveals his British roots although he has been living in Canada for more than 20 years. “A lot of mutual fund managers are nothing more than closet indexers, and we are not in that game. Rather than see our clients celebrating the fact they may have lost less money than some market index in a down market, we would rather they be celebrating making money.”

Wanstall was recently promoted from his post as executive vice president in charge of business development at BluMont, which has $370 million in assets under management. (BluMont is owned by Toronto-based Integrated Asset Management Corp., a Canadian alternative-asset management company with $2 billion in AUM that focuses on institutional clients.) Wanstall says he wants to restrict the retail product line to a small number of niche funds rather than be a fund supermarket.

“We have a narrow focus and are not trying to be all things to all people,” he says. “We don’t want to offer 58 shades of pink.”

The firm currently has three fund families: BluMont, Exemplar and Northern Rivers. The product line is a mix of BluMont-branded hedge funds available to accredited investors — or those with a $150,000 minimum investment — as well as regular mutual funds under the Exemplar name that have a minimum initial investment of $5,000. BluMont had purchased Toronto-based investment-management firm Northern Rivers Capital Management Inc. in December 2009 and is now in the process of merging that firm’s four funds into the BluMont family.

Fund managers in the BluMont stable include known names, such as chief investment officer Veronika Hirsch and Northern Rivers alumni and micro-cap experts Hugh Cleland and Alex Ruus, both of whom are now employed by BluMont. Also managing BluMont money is U.S.-based subadvisor David Iben, CIO at Los Angeles-based Tradewinds Global Investors LLC.

BluMont’s flagship fund is BluMont Hirsch Performance Fund, a $294.7-billion hedge fund run by Hirsch with a 10-year average annual compounded return of 8.2% as of Aug. 31.

The younger BluMont Core Hedge Fund shows a three-year average loss of 1.2%, but a new manager, Sherpa Asset Management Inc. of Vancouver, was appointed in July to replace Burlington Capital Management Ltd. of Burlington, Ont. The goal of this fund is to be “market-neutral” and generate positive returns in any market by balancing stock holdings with an options-trading strategy. When volatility goes up, options premiums typically increase — providing a natural offset to the risks presented by high volatility.

The first two Exemplar mutual funds were introduced in May 2008 — just before the financial crisis decimated stock markets around the world. Exemplar Global Opportunities Fund, managed by Iben, and Exemplar Canadian Focus Portfolio, managed by Hirsch, have survived what Wanstall calls a “baptism by fire,” having skated through the crisis with positive returns. Exemplar Diversified Portfolio, a managed futures fund run by Roland Austrup, president of Toronto-based Integrated Management Futures Corp., was introduced in 2009.

Although the Exemplar funds are classified as mutual funds, they may have short positions equivalent to 40% of their AUM under the commodity pool exemption (National Instrument 81-104).@page_break@The Global Opportunities and Canadian Focus funds can trade options and also may invest in private equity, convertible debt and regular debt, as well as in short and long equity positions. Exemplar Diversified Portfolio is even less correlated with stock market indices, given its mandate to invest in global industrial and agricultural commodities, currencies, fixed-income instruments and equity indices.

On the distribution side, the Exemplar funds may be sold only by firms and financial advisors who are fully licensed to sell securities.

BluMont is also “opportunistic,” as Wan-stall says, in identifying smaller deals for private investors. For example, BluMont is currently assembling a pool of multi-storey parking lots currently being individually sold off by various municipal governments in Britain. It’s a form of infrastructure investment, Wanstall says, that throws off high cash flow. The plan is to take the pool public, providing an exit strategy for the original investors.

“We get access to strategies and ideas that don’t come through the door of the average asset-management business,” Wanstall says, noting that this situation is largely as a result of BluMont’s relationship with parent firm IAM. “If we can get in the middle of the asset flows and catch something valuable for investors, we will do it opportunistically. We hate closet indexing. As active managers, we have the flexibility to deliver something meaningful.”

Wanstall says BluMont’s products appeal to the “corner-office advisor” who has a large book of business and is offering a more sophisticated value proposition to clients rather than simply steering them into the perceived safety of balanced and fixed-income funds.

“We are not just selling a product,” Wanstall says. “We are selling solutions to improve clients’ portfolio returns — and, ultimately, the viability of the advisor’s book of business. There’s a need for high-quality solutions that can weather uncertain market conditions.”

Having non-correlated investments such as private equity, managed futures and short positions that can profit in down markets balances the overall returns of a diversified portfolio, he says, and this smoother ride helps investors manage their emotions better so they aren’t tempted to sell out at market bottoms and jeopardize their long-term performance.

“Volatility is here to stay — there’s a once-in-a-lifetime event happening every three weeks,” Wanstall says. “We want to provide retail investors with products to help them manage this volatility.”

Wanstall, who was born in Beckenham, Kent, a village just outside London, views his entry into the financial services business as a random and happy accident. After finishing high school, he had entered the textile business, but quickly decided it wasn’t for him. So, he put on his only suit and walked into a temporary help agency. He was given a temporary assignment in the back office of Toronto-based McLeod Young Weir Ltd. (now ScotiaMcLeod Inc.) in London. Within a year, at the age of 19, he was trading European bonds; a year later, he established the foreign-exchange desk.

Wanstall left MYW after the 1987 stock market crash and worked for a small-cap investment firm. Around the same time, he met a Canadian woman in a bar in London, who was working on a PhD in medieval French literature. Soon thereafter, Wanstall moved to Canada and married that woman, Karen.

In 1993, Wanstall joined Toronto-based Burns Fry Ltd. (now BMO Nesbitt Burns Inc.) as an investment advisor and then moved to the wholesaling side with 20/20 Financial Ltd. of Oakville, Ont., a mutual fund management firm that was subsequently bought by Toronto-based AGF Funds Inc.; he stayed with AGF until 2000.

In 2001, Wanstall joined Barclays Global Investors Canada Ltd. in Toronto (now branded as iShares) to help build its Canadian exchange-traded fund business; he then moved to alternative investments with Abria Alternative Investments Inc. of Toronto. Finally, he joined BluMont in 2006 as executive vice president of national sales.

In his spare time, Wanstall likes to play golf and indulge in creative writing, pecking away on a novel that he says will “probably never be finished.” He finds cooking “therapeutic and cathartic” and likes to make his own bread and pasta. He has two daughters, 15 and 13, and one son, 11. Wanstall is president of the children’s choir that his children sing in, and is also part of the “Dads’ chorus” that sings with that choir. IE