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Most Edhec hedge fund indices positive in August but poor stock market performances impacted equity-oriented strategies

Monday, September 20, 2010
Opalesque Industry Update - In August, the harsh stock market situation reduced July’s sharp rebound to a mere glimmer of optimism. In a context where implicit volatility was back on the rise (26.05%), the S&P 500 index almost eliminated its gains of July with a significantly negative return (-4.51%). In line with May and June’s performances, the decline in August pulled the year-to-date performance down into clearly negative territory (-4.62%).

On the fixed-income market, even though convertible bonds did not wipe out their exceptional gain in July, they did resume their downward slide (-0.81%). Regular bonds followed a more stable trend and managed a third consecutive month of gains (+0.84%). The Lehman Global Bond index yielded an even better return (+2.01%). After two months on the rise, the commodities market almost erased the previous month’s gain with a sharp drop (-4.89%). The dollar recovered partially (+1.79%) from a hectic summer period.

Similarly to its situation in June, and despite the losses of convertible bonds and a shrinking credit spread (-0.85%), the Convertible Arbitrage strategy took advantage of the plummeting stock market to manage a positive return (+1.25%) for a third consecutive month. Despite the losses on the commodities market but along with regular bonds, the CTA Global strategy managed a significant gain (+3.04%), its best since last November.

The poor performances of the stock market naturally impacted the equity-oriented strategies. After some comfortable gains in July, the Equity Market Neutral (-0.57%), Event-Driven (-0.29%) and Long/Short Equity (-0.96%) strategies all inevitably lost ground.

Curiously enough, despite its reduced exposure to the stock market, the Equity Market Neutral strategy was not the best performing among them. Conversely, the Fixed-Income Arbitrage strategy managed a significant profit (+0.99%).

Globally, the Fund-of-Fund strategy remained stable (+0.02%), clearly outperforming the S&P index.

(press release)


Hedge Fund Strategies

August 2010

YTD

Convertible Arbitrage

1.25%

6.5%

CTA Global

3.04%

1.6%

Distressed Securities

-0.36%

5.6%

Emerging Markets

0.04%

2.2%

Equity Market Neutral

-0.57%

1.1%

Event Driven

-0.29%

3.6%

Fixed Income Arbitrage

0.99%

6.3%

Global Macro

1.24%

2.1%

Long/Short Equity

-0.96%

-0.8%

Merger Arbitrage

0.70%

3.6%

Relative Value

0.34%

4.1%

Short Selling

3.27%

-1.5%

Funds of Funds

0.02%

-0.5%

*


www.edhec-risk.com

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