Canadian hedge funds outperform

Date: Thursday, February 19, 2009
Author: Andrew Willis, Globe and Mail

Canadian hedge funds did what they are supposed to due in January, delivering solid positive performance despite dreary results from market benchmarks.

The average domestic hedge fund was up 3.09 per cent last month on an asset weighted basis, according to the Scotia Capital Canadian Hedge Fund Performance Index. The survey of 39 funds was up 1.94 on an equal weighted basis, which shows that the biggest funds posted the best results.

While the hedge funds had an up month, the S&P/TSX index was down 3.26 per cent and the S&P 500 dropped a gut-wrenching 8.57 per cent in January. Scotia Capital's bond index was down 0.95 per cdent.

“Canadian hedge funds delivered strong results for January as the majority of managers across all strategies posted positive results for the month,” said Scotia Capital's commentary on the numbers. The investment dealer also noted that gold stocks, a favourite of many Canadian portfolio managers, delivered sparkling performance.

Last year, the Scotia Capital hedge fund index was down 15.9 per cent on an asset-weighted basis and 22.6 per cent on an equal-weighted basis. The weak result came as a shock to investors who bought these funds on the promise of absolute returns - gains in good markets and bad. Substantial losses forced a number of domestic fund managers to close their doors.

To qualify for the Scotia Capital index, a hedge fund needs at least 12 months of performance numbers, and a minumum of $15-million in assets.