Industry Updates

EDHEC Alternative Indexes: Short selling top performer in October with + 3.4%

Wednesday, November 18, 2009

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Opalesque Industry Updates - In October, after a remarkable period of substantial gains, the stock market finally registered its first loss (-1.86%) since February 2009. With implied volatility back on the rise in a significant way (30.69%), the S&P 500 index signalled the end of a spectacular recovery that generated an unprecedented +45.76% return over the past seven months.

Similarly, after a remarkable +39.48% return between February and September, convertible bonds were bound to follow and registered their first loss (-0.76%) in eight months, whereas regular bonds managed yet another limited but positive return (+0.31%). The credit spread rose again (+0.97%) although at a slower pace. On the other hand, after a return to profitability in September, the commodities market skyrocketed (+7.36%) and reached its highest level since last year’s crisis. The dollar remained weak and fell slightly again (-0.30%).

The Convertible Arbitrage strategy did not seem to be affected by the poor performance of risky bonds, and managed yet another month of profitability (+1.26%). Over the past eleven months, the strategy has recorded a remarkable performance of +45.20%. The CTA Global strategy was not able to confirm its two previous gains (-1.39%).

Affected by the fall off on the stock market, the Long/Short Equity strategy also recorded its first loss (-0.94%) since February, although it was only about half of the S&P’s. The Equity Market Neutral strategy failed to produce a positive return and dropped off slightly (-0.12%). Conversely, the Event Driven strategy resisted and remained positive (+0.33%) for an eighth consecutive month. The Fixed-Income strategy registered a tenth month of profitability (+1.94%) and neared its highest level of October 1997.

Overall, the Fund of Funds strategy was not able to record a positive return (-0.05%) but clearly outperformed the stock market (-1.86%).

Hedge Fund Strategies	October 2009	YTD	Annual Average Return since January 2001	Annual Std Dev since January 2001	Sharpe Ratio
Convertible Arbitrage	1.26%	42.7%	6.2%	7.9%	0.28
CTA Global	-1.39%	-2.5%	7.4%	8.8%	0.39
Distressed Securities	1.38%	23.8%	10.6%	6.2%	1.07
Emerging Markets	1.11%	32.8%	12.3%	10.9%	0.76
Equity Market Neutral	-0.12%	4.1%	4.7%	3.1%	0.22
Event Driven	0.33%	20.9%	8.1%	6.0%	0.68
Fixed Income Arbitrage	1.94%	21.7%	5.6%	4.8%	0.33
Global Macro	-0.04%	8.9%	7.7%	4.5%	0.82
Long/Short Equity	-0.94%	16.2%	5.4%	7.2%	0.19
Merger Arbitrage	0.30%	8.2%	5.5%	3.4%	0.43
Relative Value	0.33%	18.2%	6.4%	4.9%	0.49
Short Selling	3.40%	-15.3%	3.0%	14.0%	-0.07
Funds of Funds	-0.05%	9.2%	4.3%	5.2%	0.06