Industry Updates

All Edhec hedge fund strategy indices up in October expect for CTA and short-selling

Friday, November 18, 2011

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Opalesque Industry Update - In October, after plummeting for five months, the equity market displayed astonishing versatility, with the S&P 500 index registering a positive double-digit return (+10.93%), its best monthly performance over the past twenty years, supported by a strong fall (-13%) in implicit volatility (30.0%). Although it has not recovered from the cumulative loss over the past five months (-16.26%), the S&P 500 index renewed with YTD profitability.

The bond market also brightened as both regular bonds (+1.07%) and convertible bonds (+5.36%) recorded their best score over the past year. On the commodities market (+9.64%), the rebound was impressive but could not make up for the losses in September (-12.40%).

Less affected by the strong rise in stocks, the Convertible Arbitrage strategy (+1.33%) took advantage of the rocketing convertible bonds to put an end to five months of losses, and achieved a breakeven YTD performance. Despite the sharp fall in the dollar (-3.15%) and in profits on the commodities market, the CTA Global strategy fell (-3.00%).

Despite its naturally limited exposure, the Equity Market Neutral strategy (+1.58%) took a nice share of the equity market profits, and compensated for its losses in September. Exhibiting higher exposures to stocks, the Event Driven (+2.97%) and Long/Short Equity (+4.30%) strategies scored better and recorded their best performance over the past two years. However, neither strategy could make up for its September setbacks and maintained largely negative YTD returns.

Overall, like most other hedge fund strategies, the Funds of Funds strategy managed profitability in October and partly recovered from the losses of September. Like most equity-oriented strategies, its 2011 YTD performance remained well below par.

(press release)

Hedge Fund Strategies	Oct 2011	YTD*	Annual Average Return since January 2001	Annual Std Dev since January 2001	Sharpe Ratio
Convertible Arbitrage	1.33%	0.0%	6.5%	7.4%	0.34
CTA Global	-3.00%	-3.7%	6.7%	8.7%	0.31
Distressed Securities	2.98%	-1.0%	10.4%	6.3%	1.00
Emerging Markets	3.91%	-6.9%	10.8%	10.7%	0.63
Equity Market Neutral	1.58%	0.8%	4.5%	3.0%	0.16
Event Driven	2.97%	-2.8%	7.8%	6.1%	0.62
Fixed Income Arbitrage	0.63%	3.8%	6.0%	4.5%	0.46
Global Macro	0.26%	-1.1%	7.0%	4.5%	0.68
Long/Short Equity	4.30%	-3.8%	5.3%	7.3%	0.17
Merger Arbitrage	1.56%	1.3%	5.3%	3.3%	0.41
Relative Value	1.67%	0.1%	6.4%	4.8%	0.50
Short Selling	-7.36%	4.7%	0.8%	14.1%	-0.23
Funds of Funds	1.22%	-4.2%	3.7%	5.1%	-0.05
* Cumulative return since January 1st of the current year