Skip to Content
News and Events

From time to time, Hillsdale is in the news. Our partners often speak at conferences or other events, and our accomplishments are covered in the financial media.

Canada Tip Sheet: Hillsdale’s Sum Is Short On Banks, Long On Tech

—Says long/short strategy offers safety with better chance of returns in uncertain environment

—Fund is short global banking sector

—Long positions focused on IT companies

May 29, 2012
By Edward Welsch

CALGARY (Dow Jones)—Investors nervous about Europe’s financial struggles are better off seeking shelter in a fund that offers short-selling opportunities, said Hillsdale Investment fund manager Alfred Sum.

Sum takes long and short positions in equities in 20 countries through the Hillsdale Global Long/Short Equity Fund, which he manages from Hillsdale’s office in Toronto. Spreading risk out geographically and hedging with short-selling provides protection in a down market, and the possibility of better returns than traditional safe-haven investments like Treasurys, he said.

Because of continued instability in Greece, and because Europe’s two major economies of Germany and France are at odds over whether to cut or increase government spending, Sum said his fund is “neutral to slightly bearish” on the global equity markets.

“We are playing from a more cautious standpoint – in terms of European exposure we have been underweight, and we intend to continue lowering our European exposure,” Sum said.

The strategy has paid off recently. The C$6.3 million (US$6.1 million) fund has gained 9.9% over the last 12 months through April, compared with a 6.8% decline in the MSCI World Index over the same period. Over the last three years, Sum’s fund has gained an average of 8.2% a year, compared with a 13.2% average annual gain on the index.

Most of Sum’s short positions are in the financial sector, which Sum said are likely to suffer the most if the European situation gets worse. Even if the European situation improves, banks’ profit margins from lending money are being squeezed by low interest rates, he said.

Sum said his fund is shorting shares of French banks BNP Paribas SA (BNP.FR) and Societe Generale SA (GLE.FR) – and would short more European banks, but for limits on short-selling imposed in European markets. Because he’s bearish on the entire banking sector, the fund is also shorting shares of U.S.-based Bank of America Corp. (BAC).

The fund is 45% net long – meaning it has 45% more long positions than short ones – and is most bullish on the information technology sector.

Sum holds long positions in IT companies including Apple Inc. (AAPL), chip maker Intel Corp. (INTC) and Chinese search engine company Baidu Inc. (BIDU). The sector is generating double-digit profit growth, and the global nature of its business means it’s exposed to high growth rates in the emerging markets and most likely to withstand a shock from the European market, Sum said.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095;