Hedge funds and precious metals lead pack at year’s halfway point

Globe and Mail – If things continue the way they have, 2006 could once again be the Year of the Hedge in the mutual fund world. The final numbers are still trickling in but as we cross the year’s halfway point, 10 of the 20 best performing funds are hedge funds, while eight are precious metals funds — often considered portfolio hedges.

In the entire universe of open-ended mutual funds with assets over $25-million, the best performer so far this year is the Salida Multi-Strategy Hedge Fund managed by Salida Capital Corp. The six-month return is near 50 per cent. As the name implies, the fund runs several hedge strategies including long/short, merger, arbitrage and systematic managed futures.

Like most hedgers, the management team at Salida keeps its cards close to its chest when it comes to strategy but president Gary Ostoich credits the strong performance with the ability to employ the right strategy to the right situation. “If you have different strategies, they’ll act differently in different market environments,” he said.

Mr. Ostoich says the fund is invested in several sectors that span the globe. Over half of the $74-million in assets is employed in a long/short strategy, with a bias toward the long side. The fund is currently shorting consumer discretionaries and taking long positions in energy. He says he doesn’t expect that strategy to change in the second half of 2006.

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