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All EDHEC hedge fund strategy indices up in January except for short selling

Monday, February 20, 2012
Opalesque Industry Update - In January, the S&P 500 gained 4.48%, almost erasing the losses incurred since June 2011, while the implied stock market volatility continued to decrease, with the VIX returning to 19.4%, close to last year’s initial level.

Equity-focused strategies, having increased their net market exposure, as shown by dynamic betas significantly higher than their long-term counterparts, exhibited strong performance and reached a five-month high: Long/Short Equity (3.36%), Event Driven (2.95%) and even Equity Market Neutral (1.01%).

In contrast, unsurprisingly enough, the Short Selling strategy (-6.85%) recorded a massive loss.

While emerging markets scored an impressive 11.32%, the corresponding hedge fund strategy only managed less than half of it (4.55%), in line with its measured dynamic exposure.

All segments in the fixed-income space showed significant gains, with high-grade bonds (0.97%) advancing to a one year high, and credit (1.53%) and convertibles (5.07%) almost reproducing last October’s stunning performance.

The Convertible Arbitrage strategy, with strong loadings on the previous two factors, consequently achieved its best performance of the past year (2.22%). The Distressed Securities (3.28%) and Fixed Income Arbitrage (1.33%) strategies also benefited from a significant credit exposure.

Commodities (2.44%) and the dollar (-1.00%) experienced a reversal and continued to lack direction.

The CTA Global strategy, with a reduced overall market exposure, only managed to post a 0.49% gain.

Finally, the Funds of Funds strategy (1.65%), started the year on a positive note after a horrendous 2011.

Hedge Fund Strategies Jan 2012 YTD* Annual Average Return since January 2001 Annual Std Dev since January 2001 Sharpe Ratio
Convertible Arbitrage 2.22% 2.2% 6.5% 7.3% 0.34
CTA Global 0.49% 0.5% 6.6% 8.6% 0.30
Distressed Securities 3.28% 3.3% 10.3% 6.3% 1.00
Emerging Markets 4.55% 4.5% 10.5% 10.7% 0.61
Equity Market Neutral 1.01% 1.0% 4.5% 3.0% 0.16
Event Driven 2.95% 2.9% 7.8% 6.1% 0.62
Fixed Income Arbitrage 1.33% 1.3% 6.0% 4.4% 0.46
Global Macro 2.05% 2.1% 7.0% 4.5% 0.68
Long/Short Equity 3.36% 3.4% 5.3% 7.3% 0.17
Merger Arbitrage 1.03% 1.0% 5.4% 3.3% 0.43
Relative Value 1.95% 1.9% 6.4% 4.8% 0.51
Short Selling -6.85% -6.9% 0.3% 14.1% -0.26
Funds of Funds 1.65% 1.7% 3.6% 5.1% -0.07
* Cumulative return since January 1st of the current year

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