Opalesque Industry Update - Markets in February mostly confirmed trends initiated last month. Equity markets nearly reproduced January’s performance (S&P 500: 4.32%) with implied volatility diminishing slightly and settling at a moderate level (VIX: 18.4%). Fixed income markets showed a more contrasted landscape with high-grade bonds flat (Lehman US: 0.03%) or receding (Lehman Global: -0.71%), while risky assets continued to improve significantly (Credit Spread Index: 1.61%, Convertibles: 2.45%). Commodities (6.48%) recorded their strongest performance since last October. Finally, the dollar (-0.63%) posted a small loss for the second consecutive month.|
Strategies in the equity space exhibited returns broadly consistent with the market dynamics (Long/Short Equity: 2.63%, Equity Market Neutral: 0.84%, Event Driven: 1.76%). The Event Driven strategy performed in line with its modelled dynamic exposure while the other two showed significant alpha.
The Short Selling strategy lost 5.59%, even exhibiting negative alpha relative to the stock market.
The Convertible Arbitrage strategy, thanks to its exposure to the strongest fixed-income factors, recorded a 2.03% gain and its index progressed to a level close to its all time high. The Distressed Securities strategy, with an increased short-term sensitivity to credit risk, returned 1.95%.
The global CTA strategy was positive for a fourth consecutive month, however with an increased magnitude (0.93%). Its slightly positive (respectively negative) dynamic exposure to commodities (respectively the dollar) only partially accounts for this fact.
Overall, with most strategies having markedly benefited from market conditions, Funds of Funds returned 1.46% and confirmed a robust start for the year 2012.