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

Wednesday, November 18, 2009
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

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- FG

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