Canada’s Palos Launches Hedge-Like Mutual Fund

Apr 6 2011 | 3:44am ET

Hedge fund Palos Management is bowing to market pressure by setting up a mutual fund.

The Montréal-based firm’s Equity Income Fund invests primarily in Canadian income-paying securities. But Palos is a hedge fund, after all, so the new fund will have some freedom to short securities or engage in merger arbitrage and pairs trading strategies.

“We were being asked by investment advisers to create a mutual fund for retail investors that pays out quarterly distributions and is RRSP eligible, so that their clients could have access to our unique strategies,” Charles Marleau, president of Palos, said.

The “new” fund isn’t actually all that new: It’s been around as a private mutual fund for more than three years. It launched as a public mutual fund in February and boasts some C$11.5 million in assets.

And while Marleau will have some freedom to use hedge-like strategies, the fund can invest no more than 20% of its assets in short positions and cannot invest outside of North America.

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