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Parker FX Index down 0.39% in November, +1.66%.YTD

Friday, January 07, 2011
Opalesque Industry Update - The Parker FX Index is reporting a -0.39% return for the month of November. Sixtynine programs in the index reported November results, of which twenty-six reported positive results, forty-two incurred losses and one was flat. On a risk-adjusted basis, the Index was down -0.17% in November. The median return for the month was down -0.35%, while the performance for November ranged from a high of +7.10% to a low of -5.36%. Year to date, the Parker FX Index is up +1.66%.

In addition to the broad Parker FX Index, there are two style driven sub-indices: the Parker Systematic Index, which tracks those managers whose decision process is rule based, and the Parker Discretionary Index, which tracks managers whose decision process is judgmental. During November, the Systematic Index was down -1.03% while the Discretionary Index gained +0.26%. Year to date, the Systematic Index is up +1.53% and the Discretionary Index is up +1.79%. On a risk-adjusted basis, the Parker Systematic Index was down -0.37% in November, and the Parker Discretionary Index was up +0.17%.

The top three performing constituent programs for the month of November, on a reported basis, returned +7.10%, +3.67% and +3.00%, respectively. The top three performers on a risk-adjusted basis returned +2.40%, +1.82% and +1.65%, respectively.

In November, the currency markets were largely influenced by an increase in risk aversion, fueled by the ongoing European sovereign debt crisis, North Korea’s unprovoked artillery attack along the maritime border between the two Koreas, and uncertainty regarding China’s future monetary policy actions. As a result, the US Dollar Index was up +5.09%, rallying against nearly all of the majors. Against this backdrop, many currency managers sustained losses for the month. The euro fell to the lowest levels versus the US dollar and the Japanese yen in over two months on increased speculation regarding the sustainability of the Eurozone and that the sovereign debt crisis was no longer confined to just a few countries. Instead, there appears to be a significant risk of financial market contagion spreading throughout the Eurozone, resulting in a significantly weaker euro. The major concern for investors and policy makers is that Portugal, Spain and Belgium may require similar rescue packages to the €85 billion outlined for Ireland. These fears were augmented when S&P reported that it may cut Portugal’s credit ratings on concerns the government had made little progress to boost economic growth.

The Parker FX Index is a performance-based benchmark that measures both the reported and the riskadjusted returns of global currency managers. It is the first index used to analyze unleveraged (risk-adjusted) performance in order to calculate pure currency alpha, or manager skill. The 299 month compounded annual return since inception (January, 1986 through November, 2010) is up +11.71% on a reported basis and up +3.13% on a riskadjusted basis.

From inception (January, 1986 through November, 2010) the compounded annual return for the Parker Systematic Index and the Parker Discretionary Index, on a reported basis, is +11.91% and +9.65%, respectively.

From inception, the compounded annualized return, on a risk-adjusted basis, for the Parker Systematic Index and the Parker Discretionary Index, is +2.79% and +3.76%, respectively.

(press release)

The Parker FX Index tracks the performance, or value-added, that managers have generated from positioning long or short foreign currencies. The Index is equally weighted, as opposed to capitalization weighted, to preclude very large managers from swaying the performance in a direction that may not be representative of the currency manager universe. Parker Global Strategies applies its model to the performance of a representative currency portfolio or composite, net of fees, and excluding interest for each currency manager.

The Parker FX Index currently includes 71 programs managed by 62 firms located in the US, Canada, UK, Germany, Switzerland, France, Ireland, Singapore and Australia. The 71 programs include a combination of 46 programs that are systematic and 25 programs that are discretionary. The 71 programs manage over $40 billion in currency strategy assets. The Index also includes the performance of currencymanagers who are no longer trading in order to address survivorship bias. Disciplines include technical, fundamental and quantitative.

Founded in 1995, Parker Global Strategies specializes in designing and managing multi-manager hedge fund strategies for institutional clients across the globe and providing risk management oversight. PGS also designs and manages niche fund of hedge funds including Currency, US Energy Infrastructure, Transparency, CTAs and Green...Corporate website: Source
KM

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