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Evergreen Eyes Close as Ex-Goldman Traders Top Hedge Funds

Evergreen Capital Partners Ltd.’s Australian hedge fund, which gained 58 percent in its first 18 months by buying resource stocks and short-selling retailers, will close to outside investors in six to 12 months to remain focused on its investments, co-founder Tim Hannon said.

Evergreen’s long-short equities fund will stop accepting new money when it reaches A$200 million ($206 million) from its current A$100 million, Hannon, a former Goldman Sachs JBWere Ltd. asset manager, said in a telephone interview yesterday.

“We don’t want to manage a lot more money; our size is one of our chief competitive advantages,” Hannon, 39, said. “I’m not doing any more marketing.”

Melbourne-based Evergreen was the best performer among 157 Australian hedge funds over the past year, according to data compiled by Bloomberg. While most of the industry’s funds stagnated or shrank amid 2011’s market turmoil, Hannon made money by betting against Australian retailers such as Harvey Norman Holdings Ltd. and David Jones Ltd.

Evergreen, which aims to deliver a return after fees of 15 percent per year, advanced in all but two of its first 18 months through to the end of November, company reports show. The benchmark S&P/ASX 200 index fell 13.2 percent in the first 11 months of last year, while the fund added 19.2 percent.

“These guys have put Australia on the map,” said Damien Hatfield, director at Triple A Partners Australia, a Sydney-based hedge-fund adviser. The global “hedge-fund industry is down about 5 percent for 2011 and a strong positive returner like Evergreen is attracting attention. As they gather assets under management they have to pump out consistent returns to maintain that boost.”

Tough Climate

The fund -- founded by Hannon and Chief Operating Officer Jo Rylance -- began trading in May 2010 as the first round of Europe’s sovereign debt crisis roiled global stock, currency and bond markets. Hannon and his team of five, which includes former Goldman Sachs JBWere analyst David Tay and ex-Goldman Sachs Asset Management Executive Director Andrew Smith, use short sales that involve selling borrowed shares and buying them back later to make money from stocks they expect to fall.

The fund remains “extremely bearish” on so-called “retail landlords,” including David Jones, Australia’s second-largest department store chain, and its larger rival Myer Holdings Ltd., he said.

The 26-member Australian S&P/ASX 200 Consumer Discretionary Index tumbled 20 percent in the past year as Europe’s debt crisis and the developed world’s highest central bank borrowing costs prompted consumers to slash spending and increase savings close to the highest pace in a quarter century.

Resource Bets

“We think there’s a structural change which needs to occur” among retailers, which “have been in a protected industry for decades,” he said.

Evergreen, whose investors include wealthy families, has increased bets on potential gains by resource companies including Beach Energy Ltd., Drillsearch Energy Ltd. and Senex Energy Ltd., he said. The trio search for shale gas in Australia’s Cooper Basin, an outback region straddling the Queensland state and South Australia state border.

If larger energy companies such as Origin Energy Ltd. find themselves short of gas for their LNG plans “you might see some acquisition activity in that area,” Hannon said.

Beach Energy rose 1.5 percent in Sydney trading today. Senex advanced 2 percent to the highest since March 2000, while Drillsearch slipped 3.8 percent.

Evergreen says it hasn’t been hurt by being domiciled far from traditional hedge fund centers such as London and New York.

“We hear this a lot but that’s certainly not our experience,” said Hannon. “You really can manage as much capital as you want. We’re getting inundated with calls from funds-of-funds and family offices,” including from Asia.

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