Auspice Capital Advisors lets retail investors tap into professional strategies
This commodity-trading firm in Calgary specializes in managing risk
by Alix Kemp
#16 on the Fast Growth 50
Auspice Capital Advisors
Head office: Calgary
Industry: Financial Services
2010 gross annual sales: $982,837
2009 gross annual sales: $982,837
Three keys to growth:
- Offer innovative products and make them available to a wide base of clients
- Have a business model that can survive any eventuality
- Hire people who believe in the vision of the company
When it comes to investing, Tim Pickering is a self-described conservative. However, given his company’s focus on offering innovative products, he may not be as conservative as he thinks.
Pickering founded Auspice Capital Advisors, a commodity-trading firm based in Calgary that specializes in managing and reducing risk. Auspice’s financial tools, which include hedge funds, mutual funds and ETFs, are aimed at providing investors’ portfolios with diversity and reducing volatility. It’s an approach that adapts investing strategies developed for institutional investors to individual needs.
Pickering was a portfolio manager for institutional traders like TD Securities and Shell Trading (a division of Shell Canada) before setting off on his own in 2005. He was joined a year later by Ken Corner, a co-worker from Shell who shared Pickering’s vision. “We felt that the style of investing that we had done for those institutions wasn’t available to most Canadian investors,” Pickering says.
Auspice specializes in managed futures in commodities as well as options contracts. The Auspice Diversified Program is the company’s flagship product, a hedge fund available only to high-net-worth individuals and institutions accredited by the Alberta Securities Commission and considered savvy and stable enough to make higher-risk investments. The fund trades no actual equities, but instead a group of broadly diversified futures on everything from crude oil to orange juice and equity indexes.
The basic idea behind the fund is simple: provide products in areas where Canadian investors – many of whom prefer individual stocks and bonds – don’t have much money at work. This diversity can reduce the portfolio’s risk, but also adds returns that have low correlation (that is, they don’t move in lockstep) to the rest of the portfolio. The fund targets annualized returns of around eight to 12 per cent.
Auspice has now launched a second hedge fund, the Auspice Energy Program. It has has also moved beyond hedge funds and into products suited to investors who don’t have the minimum $1.5 million in a managed account that Auspice requires for its Diversified Program. The company first partnered with Calgary’s Natural Gas Exchange (NGX) to create the NGX Canadian Natural Gas Index, then with Claymore Investments Inc. (which just sold to American investment firm BlackRock) to create an ETF based on that index. Auspice has since partnered with Canada’s Horizons Exchange Traded Funds and the U.S.-based Direxion Funds to create other ETFs and mutual funds that are available to retail investors but stay true to the same strategies that define the company’s initial offerings. “The individual investor has a right to have this type of an investment, [one] that adds value to their portfolio,” says Pickering.
Auspice reached 16th place on the 2012 Alberta Venture Fast Growth 50 list, a bump up from last year’s 17th-place finish. In 2008, the company generated $235,000 in revenue; that number has since quadrupled, with Auspice finishing 2010 with revenues of $982,000.
Part of that success might be due to Pickering’s choice of a home base for the company. Pickering is originally from Calgary, and after spending time in Toronto and Texas, he decided to return home to Alberta to establish Auspice. “It doesn’t matter where I am from a physical perspective, in terms of where I live or run my business,” he says. “What does matter is that Calgary is a buoyant economy and has investors that are looking for products like ours, and also investors that are looking for innovation and things that are unique.”
Being in Calgary helped Auspice grow through the recession that hit in 2008. That year, the Auspice Diversified Program was the best-performing commodity fund in Canada, achieving 44 per cent returns while the rest of the market went down. But while Auspice performed well, Pickering says the recession made things difficult for the company. “It was very difficult to attract investors in 2009 because everybody was scared of the markets,” he says. Although the market perked up in 2010, it remained challenging to find new investors until 2011. Pickering considers it a lesson in how to build a business, and it’s one of the key reasons why the company has pursued a broader range of clients. In fact, it mirrors the way Auspice builds its clients’ portfolios. “You have to have a business model that can be what I’ll call ‘the all-weather business model,’ just like you need an all-weather portfolio.”
The company’s growth hasn’t come without its challenges. “Any small business has the challenge of trying to attract top people despite being a small company, when perhaps you can’t pay top prices,” Pickering says. “When you decide to be an entrepreneur, or when you decide to go work for an entrepreneurial organization, you’re committing to a part of that vision and that growth and that dream, so there’s a commitment there and there’s sacrifice.”
And while Calgary’s economy may have shielded Auspice from the worst of the recession, it also puts the firm in competition for employees with the high salaries offered by oil and gas companies. Still, Auspice has grown from just one person (Pickering) to a seven-person office in downtown Calgary. Pickering credits the company’s reputation and principles with helping the company recruit in a tough market.
“We know that everybody can benefit, no matter what type of an investor you are, from this type of investment,” he says. “What we do at Auspice, and the products we offer, are not just for the ultra-wealthy or the high-net-worth individual. They’re for everybody.”