The Scotia Capital Canadian Hedge Fund Performance Index was down in June for a second consecutive month.
Asset-weighted and equal-weighted values down were down -1.63% and -1.32%, respectively, due in large part to continued market choppiness in the first two weeks of the month carried through from May. Turbulence in the energy sector in particular contributed to the overall market malaise. June 13 was the largest one-day loss for the S&P/TSX in over two years; however, these losses began to ease toward the end of the month as hedge fund managers adjusted their long/short positioning to profit from the increased volatility.
As was widely expected, the Federal Reserve raised the key interest rate for the 17th consecutive time (up 25bps to 5.25%) and announced that further increases will depend on economic developments. In Europe, the ECB also raised the benchmark rate for the third time in six months by 25bps to 2.75% to curb inflation as economic growth accelerates. Prices for industrial commodities fell after the US Federal Reserve reiterated its intent to remain vigilant in its inflation fight.
All of these developments affected Canadian hedge fund managers like their global counterparts, albeit to a somewhat heightened degree. The majority of Canadian hedge funds underperformed the overall global hedge fund marketplace (CSFB/Tremont Hedge Fund Index down 0.11%). Those funds with long equity exposure experienced the most significant declines and short-biased managers had positive ones.
On a YTD basis, the Canadian sector remained positive returning 9.40% and 8.27% (asset & equal weighted) after fees, which remains higher than the CSFB/Tremont Hedge Fund Index of global managers which returned 6.29%.
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 CAD 15 million and at least a 12-month track record of returns, managed by Canadian-domiciled hedge fund managers.