Betting against U.S. credit sector pays off for CI Global Opportunities Fund

For the second month in a row, the fund with the highest one-month return in Morningstar's retail database in August was the $24.6-million CI Global Opportunities, a hedge fund that bet heavily against the ailing U.S. credit sector. It followed up its chart-topping 24.2% July return with a gain of 12.9% last month, according to final performance data published today by Morningstar.

In a recent interview, the fund's manager, Nandu Narayanan, told Morningstar that the bulk of his strategy is comprised of short positions in the subprime credit market and lenders that focus on housing. This is a sector that has been in a freefall since the start of the summer, and CI Global Opportunities was arguably the best-positioned fund in Canada to benefit from that collapse. These two exceptional monthly returns have boosted the fund's year-to-date return to 51.6% as of August 31, also the best result among all funds.