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Most Edhec Hedge Fund Indices down YTD except for Market Neutral, Fixed Income Arb, Merger Arbitrage, Short Selling

Wednesday, January 18, 2012
Opalesque Industry Update - In December, the stock market experienced a slight rebound, with the S&P 500 gaining 1.02% in a context of steadily decreasing implied volatility: the VIX reached a 23.4% level after three consecutive months of retreat from its September peak (43.0%).

Fixed-income markets improved significantly with high-grade bonds (+1.19%) erasing their previous month’s loss and credit spreads tightening moderately (+0.53% for the index). In contrast, convertible bonds (-0.45%) continued to fall back.

Commodities (-1.99%) proved unable to sustain upward momentum and dropped back to their October level, while the dollar (+1.34%) ended the year with a slight gain after rising for two months in a row.

Benefiting from its credit exposure, the Convertible Arbitrage strategy posted a 0.29% gain, but remained in the red over the full year (-0.70%). With no clear trend in the short term and a year characterised by sharp reversals in the markets, the CTA Global strategy (+0.29%) was barely positive for the month while posting a moderate yearly loss (-3.47%).

In line with a slight dynamic exposure to the equity risk factor, the Equity Market Neutral strategy managed small but positive monthly (+0.05%) and yearly (+0.88%) performances.

Despite significant dynamic betas relative to the S&P 500, the Event Driven (-0.37%) and Long/Short Equity (-0.57%) strategies were unable to benefit from December’s rebound, thus confirming severe underperformance over the full year, with -3.71% and -5.97% returns respectively.

The Funds of Funds strategy did not demonstrate any diversification effect, exhibiting a performance consistent with that of the worst strategy (Long/Short Equity) in December (-0.53%) as well as for the whole of 2011 (-5.86%).

Hedge Fund Strategies

Dec 2011

YTD*

Annual Average Return since January 2001

Annual Std Dev since January 2001

Sharpe Ratio

Convertible Arbitrage

0.29%

-0.7%

6.3%

7.4%

0.32

CTA Global

0.29%

-3.5%

6.6%

8.6%

0.30

Distressed Securities

0.12%

-2.6%

10.0%

6.3%

0.96

Emerging Markets

-1.30%

-10.8%

10.2%

10.6%

0.58

Equity Market Neutral

0.05%

0.9%

4.4%

3.0%

0.14

Event Driven

-0.37%

-3.7%

7.6%

6.1%

0.59

Fixed Income Arbitrage

0.42%

3.9%

6.0%

4.4%

0.44

Global Macro

-0.17%

-1.7%

6.9%

4.4%

0.65

Long/Short Equity

-0.57%

-6.0%

5.0%

7.3%

0.13

Merger Arbitrage

0.33%

2.0%

5.3%

3.3%

0.40

Relative Value

0.32%

0.0%

6.3%

4.8%

0.48

Short Selling

0.20%

6.5%

1.0%

14.0%

-0.22

Funds of Funds

-0.53%

-5.9%

3.5%

5.1%

-0.10

* Cumulative return since January 1st of the current year

 

 

 

www.edhec-risk.com

BG

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