Industry Updates

All Edhec indices positive in July except for Short-Selling and CTA, Emerging Markets and Convertible Arbitrage indices best performers

Wednesday, August 18, 2010

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Opalesque Industry Update - After two months of severe disappointment, stock market investors seemed to renew with unbridled optimism in July, with the S&P 500 index exhibiting extraordinary performance (+7.01%) - its best return over the past twelve months - and implied volatility (23.50%) dropping by one third.

Similarly, on the fixed income market, convertible bonds turned positive to record their best performance (+5.42%) over the past year. Regular bonds registered a second month of significant gains (+0.99%), while the Lehman Global Bond Index (+0.68%) appeared more cautious. The commodities market soared (+5.98%) whereas the dollar fell sharply (-4.30%), taking its most severe hit since May 2009.

Favourably impacted by the remarkable returns of convertible bonds and the renewed rise (+1.15%) in the credit spread, the Convertible Arbitrage strategy registered a significant return (+2.32%) that was somewhat moderated by the booming stock markets. Despite its significant long-term positive correlations with regular bonds and commodities, the CTA Global strategy only managed to record a limited yet disappointing loss (-0.48%).

On the other hand, the S&P 500 performance greatly benefited the equity-oriented strategies. First and foremost, both the Long/Short Equity (+2.13%) and Event Driven (+1.83%) strategies returned to profitability. Even though it is in essence poorly correlated with the stock markets, the Equity Market Neutral strategy recorded its most significant gain (+1.04%) since May 2009.

Overall, almost all hedge-fund strategies scored positively and, in such a favorable context, the Fund of Funds strategy exhibited a solid profit (+0.77%).

EDHEC-RISK Hedge Fund Strategies	July 2010	YTD
Convertible Arbitrage	2.32%	5.2%
CTA Global	-0.48%	-1.1%
Distressed Securities	1.51%	6.0%
Emerging Markets	3.04%	2.2%
Equity Market Neutral	1.04%	1.8%
Event Driven	1.83%	4.1%
Fixed Income Arbitrage	1.08%	5.4%
Global Macro	0.50%	1.1%
Long/Short Equity	2.13%	0.4%
Merger Arbitrage	1.22%	2.8%
Relative Value	1.84%	3.8%
Short Selling	-4.31%	-4.7%
Funds of Funds	0.77%	-0.5%