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Canadian hedge funds do their job in July

Date: Thursday, August 18, 2011
Author: Boyd Erman, The Globe and Mail

Canadian hedge funds did their job in July, producing positive returns even when broader stock markets were falling.

The Scotia Capital Canadian Hedge Fund Performance Index rose 3.29 per cent, when calculated on a basis that gives bigger funds more weighting, and 1.57 per cent when all funds are given an equal weighting.

July was a tumultuous month for stocks as the world came to grips with turmoil in Europe, which was dealing with the Greek bailout, ratings cuts for Portugal and Ireland, and the growing concerns about a sovereign debt problem. The U.S. was also a font of bad news with a slowing economy and a fight over raising the debt ceiling.

That resulted in a 2.67-per-cent drop in the Standard & Poor's/TSX Index in the month. In the U.S., the S&P 500 finished down 2.15 per cent. Hedge funds even gave bonds a run for their money as the DEX Universe Bond Index returned 2.04 per cent.

It has not been a banner year for Canadian hedge funds, which according to the Scotia index haven't produced a positive return.

Even so, July's outperformance opened a gap between the year to date performance of the S&P/TSX Index and the hedge fund managers. For the first seven months of 2011, the broader stock index was down 3.7 per cent while the asset-weighted hedge fund index was down 0.82 per cent.

However, an investor in bonds would be a head, as the Dex Universe Bond Index has a 4.29-per-cent return.