The Markets

In August, commodity prices continued to retreat with crude oil prices hitting a 4-month low and natural gas prices hitting an 8-month low. Canadian markets managed to produce a moderate advance with the S&P/TSX Total Return Index (TRI) finishing up 1.5%. Advancing sectors included consumer discretionary (7.9%), telecommunications (7.1%) and health care (4.9%). Losing sectors included materials (-7.0%) and utilities (-0.8%). The S&P/TSX Small Cap TRI returned 1.1%.

US markets delivered a positive month led by small cap stocks. The S&P 500 TRI finished up 1.4%, the NASDAQ Composite advanced 1.8% and the Russell 2000 TRI returned 3.6%. Advancing sectors included consumer discretionary (7.0%), telecommunications (3.6%) and consumer staples (2.5%). Losing sectors included materials (-2.8%), utilities (-1.9%) and financials (-1.3%).

The Funds

The Hillsdale Canadian Long/Short Equity Fund returned 4.5% versus 1.5% for the S&P/TSX TRI. The long portfolio advanced 5.2%, with the largest gains arising from positions in Fairborne Energy, Tristar Oil & Gas and Celestica. The largest losses arose from positions in Taseko Mines, Cott Corporation and Quadra Mining. The short portfolio declined 0.7%, with the largest losses coming from positions in Forsys Metal, West Fraser Timber and Parkland Income. The largest gains arose from positions in Jaguar Mining, Arctic Glacier and Golden Star. Entering September, the fund is net long energy, consumer discretionary and consumer staples, and net short financials and health care. Year to date, the fund returned 6.7% compared to 1.3% for the index, ranked in the top 1 percentile in the GlobeFund total universe.

The Hillsdale Canadian Performance Equity Fund, our Canadian long only strategy, returned 2.9%, versus 1.1% for the S&P/TSX Small Cap TRI. More than half of the portfolio holdings advanced with gains from positions in ATS Automation Tooling Systems, Enerflex Systems and Aecon Group. The losses came from positions in Northgate Minerals, Neo Material Technologies and Quadra Mining. Year to date, the strategy has returned -10.7% compared to -7.2% for the index.

The Hillsdale US Performance Equity Fund, our U.S. long only strategy, returned 0.1% versus 3.6% for the Russell 2000 TRI. Half of the portfolio holdings advanced during the month. The gains came from positions in Fuel Systems Solutions, Sapient Corporation and PMC-Sierra. The losses came from positions in Primedia, Schnitzer Steel and Stillwater Mining. Year to date, the fund has returned -12.5% versus -2.6% for the index.

The Hillsdale Suite, our multi-strategy, returned -0.2% versus 1.2% for the 60% TSX/40% Bond benchmark. The Market Neutral declined 0.7% while the Long/Short strategies advanced 0.1% and Long Only strategies advanced 0.4%. The portfolio continues to diversify across all Hillsdale strategies and maintains a volatility target of 8-10%, similar to balanced funds. Year to date, the strategy has returned 1.4% compared to 2.5% for the benchmark.

The Hillsdale Market Neutral Fund returned -3.6%. The long portfolio declined 2.3% and the short portfolio declined 1.4%. Net losses occurred in materials, consumer discretionary and financials, while net gains occurred in information technology, industrials and energy. The portfolio remains industry constrained with a near-zero net market exposure and continues to track within its risk budget. Year to date, the fund has returned -0.2%, compared to 1.8% for Canadian 91 Day T-Bills and 2.4% for 10 Year Government of Canada Bonds.

The Hillsdale US Long/Short Equity Fund returned -3.5 versus 1.4% for the S&P 500 TRI. The long portfolio declined 0.5%, with the largest losses arising from positions in Priceline.com, Biogen and Mosaic. The largest gains came from positions in Fuel Systems, Sapient and ViroPharma. The short portfolio declined 3.0%, with the largest losses occurring from positions in Quality Systems, Polo Ralph Lauren and Esco Tech; while the largest gains arose from Vertex Pharmaceuticals, Amylin Pharmaceuticals and Flowers Foods. Entering September, the fund is net long information technology, health care and energy, and net short industrials, consumer staples and utilities. Year to date, the fund has returned -14.6% compared to -11.4% for the index.

*Since inception of the fund