Ryaz Shariff journeys through jungles in far-off countries in search of valuable assets. Does that pique your interest? As you’ll learn from our interview, Ryaz is something of an Indiana Jones in the investment world. Some may say that Ryaz is too hands-on in his running of Primevest Capital, but his fund, Primevestfund, has not only survived the prolonged commodities bear market and recent oil price collapse, but has managed to beat the market since 2005, with a 10% compound annual return.
Being a commodity investor in 2015 is a very lonely proposition. The commodity bear market that started in 2011 has yet to abate, and commodity-era darlings such as Sprott Asset Management have struggled. Ryaz, though, has managed to stay much more versatile. Aside from investing within his core expertise, which is the junior and mid-size mining market, he mandates that his fund remain flexible, which is to say that he adjusts Primevestfund’s investment strategy to reflect the prevailing market conditions. This means taking advantage of non-resource special situations, including large-cap mergers as well as employing short-selling in down markets. Today, over one-third of the fund is in the non-resource sector.
While Ryaz insists that common investors cannot achieve comparable success in the junior and mid-size resource market because they lack “deep domain expertise,” there have always been instances of average-joe stock-pickers who make outsized returns from resource booms. One such example is a family friend of mine, Robert Hirschberg, the owner of a sports apparel company who resides in Toronto. Robert parlayed $20,000 into $15,000,000 by speculating in junior mining stocks throughout the 2002–2007 commodity bull market in Canada. While this anecdotal evidence should bring you some hope, I caution that one should wait until the commodity cycle turns up before investing in this sector or else risk outsized losses. A (grizzly) bear market can be mean. As Ryaz explains in his most recent fund letter, “As we continue to experience one of the longest resource bear markets in history, we have maintained a disciplined focus on building further expertise within the sector, so when the fund flows return, as is now already becoming evident in small ways, we will be the premier hedge fund in the country to benefit.”
I am not as well-versed in the resource sector as I invest in the non-resource sector of the market. Thankfully, Ryaz was both gracious and accommodating. Our interview was over the telephone, with me in Toronto and Ryaz in Vancouver. Ryaz’s responses were short and to the point.
Bear Market: a prolonged declining market.
Black Swan: an occurrence that is extremely hard to predict. Term coined by Nassim Taleb.
Commodities: companies that sell commodities (e.g., Teck Resources) or the commodity itself (e.g., copper).
Cyclical: subject to and highly influenced by uncontrollable economic changes, prices, or other developments. Can apply to companies or sectors. For example, oil producers’ profit is determined by the price of oil, which is not within their control.
Foreign Exchange (FX) trading: trading in and out of currencies, which are traded on the FX market.
Inefficient: not incorporating all available information into the prices in the market. “Inefficient” is a term generally used by investors who do not believe in the Efficient Market Theory (EMT). For example, one may feel a decline in the price of a stock was unwarranted given the available information at the time.
Leverage: when an investor uses margin (i.e., loan) to increase his/her bet on an investment to amplify their returns. Can also refer to companies that use considerable debt for expansion, acquisition, or any other form of investment.
Shorting or Short-Selling: a practice whereby some investors borrow a stock and sell it, with the anticipation that they can later buy it back at a lower price.