Industry Updates

EDHEC hedge fund strategy indices: Short Selling the best performer in November with +1.32%

Tuesday, December 20, 2011

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Opalesque Industry Update - In November, after the spectacular rebound of October, the stock market calmed down as the S&P 500 index (-0.22%) displayed a nearly stable but slightly negative performance, associated with another reduction (-7.2%) in implicit volatility (27.8%).

The fixed-income market was marked by a clear setback, with regular bonds (-1.20%) registering their sharpest loss of the year and convertible bonds (-2.74%) losing half of their outstanding gains of October. After two months of extreme performances, the commodities market (+1.55%) settled down and ended the month with a reasonable profit.

The credit spread (-2.23%) shrank significantly to reach its lowest level since September 2009, and the dollar (+2.62%) continued on its undecided course.

Impacted by the receding convertible bonds and shrinking credit spread, the Convertible Arbitrage strategy (-0.91%) lost ground despite the negative return of the stock market. Without clear short-term correlation with regular bonds, the CTA Global strategy (+0.13%) managed modest profitability.

Despite an unusually stronger short-term correlation with the stock market, the Equity Market Neutral strategy (+0.02%) managed stability. The Equity Market Neutral (+0.02%) and Merger Arbitrage (+0.17%) strategies turned up as the only two profitable equity-oriented strategies, both in November and over the year (resp. +0.83% and +1.66%). Conversely, the Event Driven (-0.54%) and Long/Short Equity (-1.36%) strategies could not repeat their positive performances of October, and deepened their year-to-date lag behind the S&P 500.

Overall, in November, the Fund-of-Fund strategy (-0.91%) practically gave back the ground gained in October and significantly underperformed the stock market.

Hedge Fund Strategies	Nov 2011	YTD	Sharpe Ratio
Convertible Arbitrage	-0.91%	-1.0%	0.32
CTA Global	0.13%	-3.8%	0.30
Distressed Securities	-1.04%	-2.7%	0.97
Emerging Markets	-2.89%	-9.8%	0.60
Equity Market Neutral	0.02%	0.8%	0.15
Event Driven	-0.54%	-3.3%	0.60
Fixed Income Arbitrage	-0.23%	3.5%	0.44
Global Macro	-0.70%	-1.6%	0.66
Long/Short Equity	-1.36%	-5.5%	0.15
Merger Arbitrage	0.17%	1.7%	0.40
Relative Value	-0.19%	-0.3%	0.49
Short Selling	1.32%	6.3%	-0.22
Funds of Funds	-0.91%	-5.3%	-0.08
* Cumulative return since January 1st of the current year