Opalesque Industry Update - The Scotia Capital Canadian Hedge Fund Performance Index finished March 2011 down 0.09% on an asset weighted basis and down 0.70% on
an equal weighted basis. The Index performed in line with North American equities and slightly underperformed global hedge fund indices.|
Global capital markets were beset with considerable turbulence in March. Key themes impacting market movements included Japan’s major earthquake, ensuing tsunami and nuclear emergency, continued civil unrest spreading broadly across the Middle East and North Africa, and ongoing concern over fiscal imbalances in Europe.
Volatility spiked dramatically following events in Japan, and equity markets sold off heavily into the first half of March. North American equities rebounded to recover most of the lost ground by month end. Canada’s S&P/TSX posted a monthly loss of 14 bps, the first down month since June 2010, and following a 25% run up. Commodities continued to rally in March, driven primarily by upward pressure on the price of oil.
On the demand side, market participants expressed expectations for an increase based on further macroeconomic data indicating modest economic recovery. On the supply side, market participants expressed mounting concern as geopolitical unrest continued to sweep across the Middle East, further impacting oil-producers.
Precious metals also continued their advance. Uranium was a notable detractor in March, selling off substantially as nuclear power has come under scrutiny as an energy source in light of Japan’s events. This in turn placed significant upward pressure on other energy commodities e.g. natural gas and coal.
US Treasuries rallied significantly mid-month amid the flight to quality, but retraced to end March flat.
FX markets were volatile again in March, driven mostly by activity in JPY trading, as it initially strengthened vs the USD due to expectations for reconstruction in Japan, then weakened following intervention by the G7. The CAD remained above par with the USD.
Canadian hedge funds slightly underperformed global peers in March, with many posting a moderate monthly loss. Managers that had de-risked portfolios during the market sell-off were hard pressed to take advantage of the rebound in the latter half of month. Managers with nimbler trading styles were able to contain losses or in some cases benefit from the significant volatility and very challenging trading environment.
Performance table: Source
The aim of the Scotia Capital Canadian Hedge Fund Performance Index is to provide a comprehensive overview of the Canadian Hedge Fund universe. To achieve this, index returns are calculated using both an equal weighting and an asset-based weighting of the funds. The index includes both open and closed funds with a minimum AUM of C$15 million and at least a 12 month track record of returns, managed by Canadiandomiciled hedge fund managers.