Burlington Partners1 LP is a North American long/short equity fund that invests primarily in the public equity markets of Canada and the United States. The fund utilizes minimal leverage or derivatives.

Investment Objective:

The primary investment objective of Burlington Partners1 LP is to provide our investors with superior absolute returns measured over a complete market cycle and to do so with a much reduced level of volatility as compared to the market.

Investment Process:

The investment process at Burlington Capital was carefully designed to provide a framework within which we could achieve our investment objective. It can be broken down into two components, our investment strategy and our portfolio strategy.

Investment Strategy Overview:

In order to generate consistent long term investment success it is critical for managers to adhere to a proven investment strategy, staying disciplined and focused on executing the strategy. It is our belief that consistent long term equity performance begins with superior 'stock picking' but requires discipline and conviction to achieve outstanding results.

Our core capability resides in our process of fundamental research enabling us to unearth great investment opportunities and our 27 years of investment experience which gives us the conviction and discipline to realize on those opportunities. The basic premise behind the investment discipline is the belief that the market, over time, rewards those companies which can generate, sustain and grow free cash flow and penalizes those companies which cannot. In addition, we believe that the efficiency by which corporate management teams utilize their free cash flow is a critical driver of shareholder value.

While it is accepted that the market is not fully efficient in the short term, over a reasonable period of time our investment philosophy has consistently proven reliable. The greatest challenge in investing is to believe in your discipline and to consistently apply it in the face of adverse events and unexpected price movements. This is where investment experience is critical and where we believe our experience differentiates us.

To achieve our investment objective we utilize a number of mechanisms aimed at isolating our ability to 'pick stocks'. The investment strategy combines Paired Positions, Thematic Calls and Income oriented investments.

Paired Positions:

The fund's investment strategy, which is unique to Canada, is built primarily around what we call 'Paired Positions'. We focus on identifying two companies in the same industry where we expect there will be significant divergence between the performances of the two companies. We "pair" the two companies together by taking a long position in one and a short position in the other.

This investment strategy allows us to' 'isolate' our ability to pick stocks while minimizing the exposure to the underlying market. In other words, we don't rely on the direction of the market to drive our performance and we expect to generate positive absolute performance regardless of the direction of the market.

Thematic Calls:

The second element to our investment strategy is Thematic calls. Thematic calls refer to positions taken based on a fundamental view of a specific market or industry. Generally, the view is based on an impending catalyst or disruption taking effect in the industry or market that creates an investable opportunity in a group of stocks.

For example, in the early 1990's innovations in mining techniques allowed for the oil sands in northern Alberta to become not only economic but to emerge as one of the lowest cost, sustainable and fastest growing energy regions in the world. For investors, this was and continues to be a tremendous investable opportunity.

Income:

The final element of our investment strategy is investing in income oriented securities in order to provide a recurring stream of cash flows to invest. This element of the strategy provides stability for the overall portfolio, although that being said, we don't believe a passive approach to investing in income oriented securities is ideal.  On the contrary we believe that actively applying fundamental analysis to income oriented investments can provide an attractive risk/return profile in all rate environments.

Portfolio Strategy Overview:

While our Investment Strategy is critical, the Portfolio Strategy is really what differentiates and defines a hedge fund. The aim of Portfolio Strategy is to dynamically adjust the portfolio to optimize the overall risk-adjusted return profile. We do this through Directional Tuning, Trading and Risk Management.

Directional Tuning:

One of the key benefits of hedge funds lies in their ability to be positioned in step with the prevailing direction of the market. That is, due to their ability to ‘go long’ or ‘go short’ stocks, hedge funds can follow the market’s lead by being ‘net long’ or ‘net short’. The significance of this is simple – hedge funds can have positive performance in rising and falling markets.

At Burlington Capital Management we are firm believers that attempting to predict the market is a futile exercise and, while some may get the call right once in a while, few have the genius required to consistently guess correctly. Our view is that to generate outstanding returns while at the same time controlling volatility and preserving capital it is essential that the fund’s exposure is at the very least not contrary to the prevailing market trend. Ideally the goal is to have the net exposure of the fund, even if small, to be in line with the prevailing trend. This will ensure that fund performance will at the very least track the core investment strategy and not be dragged down by market action for a significant period of time.

Trading:

One of the advantages of being a small fund is that our buy and sell decisions have minimal impact on the stock market. As a result, unlike large funds, we are able to capitalize on inefficiencies that may exist in the market place on a short term basis. These inefficiencies may be based on trading flow imbalances, arbitrage situations or fundamental misperceptions. In all cases, being small and nimble is a tremendous advantage, one which we plan on preserving by capping our asset base at a reasonably low level.

In addition to capitalizing on market inefficiencies, we may from time to time initiate a trading position on a company where there is a potential short term gain. These situations can present themselves due to unique market circumstances. With knowledge of the underlying business combined with an understanding of how short term supply/demand imbalances of stock can affect the price of a security, we may be able to anticipate the short term price action.

Risk Management:

There is always risk associated with investing in the equity markets and there is no way to eliminate risk entirely. Our approach is to control volatility by limiting our net market and sector exposures and by capping the adverse impact individual positions can have on the fund. In particular, we believe it is critical to not allow individual positions or net exposure to affect the fund beyond a tolerable level. We utilize a strict risk management policy which defines our level of tolerance on individual, thematic and trading losses.

Fund Details:

• Minimum Investment:
  • Accredited Investor: $100,000
  • Non-accredited Investor: $150,000
• Valuation: Monthly
• Inception: January 4, 2005
• Prime Broker: Scotia Capital
• Auditor: Silver Gold Glatt & Grossman LLP
• Legal Counsel: Borden Ladner Gervais LLP