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Broader capital markets rallied dramatically in September, reversing the challenges of August. Macroeconomic indicators quelling investor concern over the potential for a double-dip recession coupled with ongoing low fixed income yields to give market participants grounds to return to riskier assets. In the US, the S&P 500 rallied 8.76%, with strongly positive contribution from all ten sectors, led by IT, industrials and consumer discretionary. Canada’s S&P/TSX posted gains of 3.82%, with all sectors contributing positively.

Commodities rallied strongly this month, with solid gains in gold and other precious metals, in oil and energy related commodities, as well as in many softs on weather-related news. The USD depreciated against major currencies, including versus the JPY, despite the Bank of Japan’s attempt to intervene.

Against this backdrop, Canadian hedge funds performed in line with their global peers, with most funds able to take advantage of the September rallies in risk assets. Gains were muted relative to broader financial markets, however, due to hedge fund managers’ relatively low gross and net exposures. While volatility was down in September, as measured by the VIX, managers have not materially changed their cautious stance and remain focused on nimbleness to navigate reversals.

(press release)

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