The Scotia Capital Canadian Hedge Fund Performance Index finished October 2010 up 3.69 per cent on an asset weighted basis and up 2.80 per cent on an equal weighted basis.
The index performed in line with broader equities, and outperformed broader hedge fund indices on both an asset and equal weighted basis.
Broader capital markets continued to rally in October. Stable macroeconomic indicators, generally favourable Q3 earnings results and expectations for an ongoing low interest rate environment kept market participants’ attention geared towards risky assets.
In the US, the S&P 500 rallied 3.69 per cent, with gains in nine of ten sectors, led by materials, IT, and energy.
Canada’s S&P/TSX posted gains of 2.49 per cent, also with nine of ten sectors contributing positively. In Canada, materials, financials and energy led the northern rally.
Commodities rallied against weakness in the USD, notwithstanding some intra-month volatility following China’s move to slightly raise interest rates for the first time in three years.
Market participants’ anticipation of an ongoing low interest rate environment contributed to further strength in gold, which hit more new record highs in October, as well as in other precious metals.
Oil and energy related commodities also rallied. Most Canadian hedge funds benefited from the market rallies in October. The best performers were those with nimbler strategies who took advantage of the markets’ upswing by way of selective stock-picking and expressing macro views.
In aggregate, Canadian hedge fund managers continue to maintain a relatively cautious stance and low net exposures.
The aim of the Scotia Capital Canadian Hedge Fund Performance Index is to provide an overview of the Canadian hedge fund universe. 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 CAD15m and at least a 12 month track record of returns, managed by Canadian-domiciled hedge fund managers.