Opalesque Industry Update - The Scotia Capital Canadian Hedge Fund Performance Index finished May 2011 down 2.59% on an asset weighted basis and
down 1.15% on an equal weighted basis. The Index underperformed North American equities and global hedge fund indices on an
asset weighted basis.|
Risk aversion returned to broader capital markets in May. A sharp sell-off in commodities early in the month and a retreat in equities on weaker than expected global economic data were followed by an ensuing bond market rally as investors sought safety.
Intra-month jitters were additionally driven by the themes of more fiscal tightening in China and ongoing concerns over European sovereign debt, the Japanese supply chain and geopolitical events in the Middle East.
In the US, investors also reacted to a potential for an increase in bond market volatility as the US debt limit came to the fore, as well as to the Fed’s imminent exit from its QE2 stimulus program. Canadian equities declined in May with the S&P/TSX posting -1.02%.
Underperforming sectors in Canada were IT, materials and energy, with some tempering of aggregate losses as investors shifted focus to the defensive telecom, utilities and health care sectors.
In commodities, crude was down sharply on expectations for softer demand. Precious metals also dragged as silver gave back nearly 20%, following on from an increase in futures margin requirements. Gold also finished May slightly down.
In FX, the USD rebounded modestly against most major currencies and the EUR weakened to a record low versus the CHF. Bond markets rallied as yields fell across all maturities in developed markets. Canadian hedge funds incurred aggregate losses in May. Many managers across strategies were challenged by the choppy markets. Outperformers attributed gains to stock selection, sector-specific and risk exposures, as well as the ability to navigate sharp reversals.
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 Canadian-domiciled hedge fund managers. PD