Opalesque Industry Update - US fixed income yields rose sharply through the first half of March with rising longer dated bond yields leading a curve steepening on improving US economic data and increasing investor risk tolerance. Global equity markets continued to build on 2012 gains, with leadership from Financials on higher rates and release of favorable US bank stress tests results; gains were partially offset by mixed performance in Emerging Markets and Energy/Basic Materials. |
Corporate credit continued to tighten as volatility declined sharply. The US dollar gained against most currencies on the higher US yields, with declines in Gold and Oil and sharp declines in Natural Gas. Hedge funds posted gains through mid-March, with the HFRX Global Hedge Fund Index gaining +0.22%, the third consecutive monthly gain from positive contributions from Event Driven, Equity Hedge and Relative Value strategies, partially offset by declines in Macro Systematic.
The HFRX Event Driven Index posted a gain of +0.43% through mid-March, with exposure to Distressed, Special Situations and Activist funds contributing to gain. Investor risk tolerance continued to improve as both credit and M&A spreads tightened, with significant positions in Lehman Brothers, Dollar Thrifty and Yahoo. The HFRX Distressed Index and the HFRX Special Situations Index posted gains of +0.37% and +0.36%, with tight corporate credit, strong liquidity contributing and leadership from Financial equities contributing to gains. The HFRX Merger Arbitrage Index gained +0.33% through mid-month, with contributions from positions in the El Paso/Kinder Morgan, Tokio Marine Financial/Delphi Financial, and Glencore/Viterra deals.
The HFRX Equity Hedge Index posted a gain of +0.40% through mid-March, with positive contributions from exposure to the Technology, Financials and Energy partially offset by mixed performance in Emerging Markets and Market Neutral strategies. The HFRX Fundamental Value Index posted a gain of +0.46% with US large cap and European small cap contributing to gains, while the HFRX Fundamental Growth Index was unchanged through mid-month, with gains in Emerging Markets offset by European exposure. The HFRX Equity Market Neutral Index declined by -0.55% as implied volatility and trading volumes both declined, with gains in factor-based strategies offset by trading and behavioral strategies.
Despite the sharp rise in US yields, the HFRX Relative Value Arbitrage Index posted a gain of +0.33% through mid-March, with gains in Multi-Strategy and Corporate fixed income exposures. US and Emerging markets exposures contributed to gains for the month, which were only partially offset by weakness in Energy Infrastructure and Asian convertible exposures. Selective fixed income exposure and effective rate hedges contributed to the HFRX RVA Multi-Strategy Index gaining +0.15% through mid-month, while falling volatility and rising yields contributed to a decline of -0.22% for the HFRX Convertible Arbitrage Index.
The HFRX Macro/CTA Index declined by -0.41% through mid-March, with positive contributions from discretionary strategies offset by negative contributions from systematic, trend following strategies. Discretionary macro managers had gains in tactical currency and hedge fixed income exposures which were partially offset by weakness in commodity exposure. The HFRX Systematic Diversified CTA Index posted a decline of -1.16% for the period, with weakness concentrated in commodity and fixed income exposures. Full press release and performance table:Source