Opalesque Industry Update - Equity Markets posted mixed results for the month of October, broadly maintaining but not building on September's strong gains, performance was generally stronger in Asian equity markets. Fixed income markets also gained in October in anticipation of additional quantitative easing & corresponding bond purchases in the US; investors also continued to focus on the mortgage markets and new developments related to foreclosure processing. The US dollar declined against both the Euro and the Yen, while commodities were also mixed, with strong gains in Sugar. The HFRX Global Hedge Fund Index gained +1.12% for the month, with strength in Relative Value Arbitrage, Macro and Equity Hedge offsetting weakness in Event Driven strategies. |
The strongest area of contribution was from Relative Value Arbitrage strategies as the HFRX Relative Value Arbitrage Index posted a gain of +1.68%, bringing YTD performance of the index to +6.52%. Performance was strong across different sub-strategy indices as yields generally declined in anticipation of US government fixed income purchases. Both Convertible Arbitrage and RV: Multi-Strategy exposures contributed to gains, as high yield credit generally improved and volatility declined slightly.
Event Driven strategies were the weakest area of performance in an otherwise positive month, with the HFRX Event Driven Index posting a decline of -0.59%; this loss pares YTD gains to +1.42%. Gains in Distressed and Merger Arbitrage (+2.36 and +0.91, respectively) were offset by losses in equity-sensitive Special Situations exposures, as restructurings and announced transactions generally benefited from lower yields and steady improvements in investor risk tolerance. Special Situations posted on offsetting decline of -1.05% on selective weakness in US & developed market equities.
The HFRX Equity Hedge Index posted a gain of +1.55 in a mixed environment for global equity markets, bringing YTD gains to +3.39%. Equity Hedge has the strongest contributions from Fundamental Value and Equity Market Neutral, each adding +1.52 and +0.63%, respectively. Fundamental Growth strategies posted a narrow gain of +0.06% for the month.
Macro strategies posted a gain for the October, with the HFRX Macro Index adding +0.97%, paring a YTD decline in Macro to -1.95%. Macro gains were concentrated in Systematic strategies, which posted a gain of +1.89 on strength in long commodities and metals exposures. Discretionary strategies once again had a partially offsetting negative contribution.