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Lyster Watson Credit Fixed Income Index down -1.03% in September (+1.62% YTD)

Tuesday, October 18, 2011
Opalesque Industry Update - Hedge funds demonstrated their directional sensitivity to beta once again in September, as all strategies except Volatility Arbitrage posted losses. Equity strategies in particular posted losses about half as large as their long-only corollaries.

With fewer than half of all funds reporting, declines in the Lyster Watson Long/Short Equity Indices ranged from -1.37% among Western European-focused funds to -8.75% for Emerging Markets managers. Funds focused on high yield bonds lost 1.03%, a small fraction of the decline in the prices of high yield bond indices.

Distressed Investment funds absorbed about half the loss of their sector, falling 3.87%. Event Equity managers avoided the worst of both debt and equity markets, but still lost 2.60%. Even Directional Macro, a strategy that often benefits from high volatility, dropped 54bp.

The 1.45% gain that Volatility managers posted reflects both their long exposure to their primary risk factor, volatility, but also their caution in expressing it in a month when it gained over 15% as measured by the medium-term VXZ Index ETF, and over 35% as measured by the shorter-term VXX Index ETF...Corporate website:Source

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