Canadian Hedge Funds Outperform: AIMA Canada Winner

Date: Friday, March 5, 2010
Author: AIMA Press Release

This year’s AIMA Canada-Hillsdale Research Award Winner finds that smaller is better when it comes to Canadian hedge funds. The 2010 winning paper, called The Great White North, was written by Peter Klein, Daryl Purdy and Isaac Schweigert. The paper finds that Canadian hedge funds outperformed their global peers because of their smaller asset size, which mirrors Canadian equity markets. Say the authors, Canadian hedge fund managers must limit their capital base to keep nimble in a smaller pool of investments. The small size of Canadian markets makes them more inefficient than global markets – an advantage for Canadian hedge fund managers who benefit from greater inefficiency.

Another finding of the paper: Canadian hedge funds were less correlated to U.S. and global equities during the period studied by the authors.

The authors conclude:

“Our analysis shows that the unique risk characteristics of Canada’s capital markets have been clearly evident in its hedge fund industry. When considered on a portfolio basis, Canadian hedge funds have continued to be attractive for Canadian as well as foreign investors. In short, the longstanding allure of the Great White North appears not to have diminished.”