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EDHEC hedge fund indices end 2009 on positive note, except for CTA and Short-Selling

Tuesday, January 19, 2010
Opalesque Industry Update - In December, the stock market ended the year with another gain (+1.93%) and implied volatility (21.68%) was at its lowest level since May 2008. With a remarkable annual return in 2009 (+26.5%), the S&P Index recovered half the losses of the disastrous previous year (-37.0%).

On the bond market, regular bonds (-1.63%) registered their first loss since February but remained at a higher level than their pre-crisis peak of February 2008. On the other hand, convertible bonds (+1.45%) recorded a full year of monthly gains, managed an unprecedented annual performance (+36.8%) and reached their level of May 2008. The commodities market achieved a fourth month of significant gains (+2.35%). However, its remarkable return since February 2009 (+56.0%) only represents one-third of its losses after June 2008. The dollar scored well (+3.0%) and made up for the three previous months. The credit spread rose again (+2.33%) for a ninth consecutive month.

The good results of risky bonds and the increasing credit spread kept Convertible Arbitrage on the rise (+2.18%). With a full year of substantial monthly profits, the strategy scored a yearly gain (+46.9%) which made up for the 2008 losses (-25.6%), and clearly outperformed the S&P. Similarly, both Distressed Securities (+3.65%) and Emerging Market (+2.32%) strategies registered a tenth consecutive month of sound profit, and clearly outperformed (respectively +30.9% and +37.9%) the stock market over the year.

After a year of wavering monthly performances, the CTA Global strategy ended on a significantly negative note (-2.75%) which turned its annual result into a loss (-2.13%). Conversely, the Equity Market Neutral strategy scored positively (+0.84%) and secured a yearly gain (+5.20%) in line with the pre-crisis performances.

The Event Driven (+2.57%) and Long/Short Equity (+1.99%) strategies benefited from the stock market performance and both registered significant gains. Over the year, reflecting their correlation with the stock market, both strategies achieved annual performances (respectively +26.0% and +20.2%) that were comparable to but slightly below the S&P.

Overall, the Funds of Funds strategy registered a modest gain (+0.70%) and exhibited a yearly performance (+10.7%) which was clearly below that of the stock market.

EDHEC-Risk Institute - Hedge Fund Strategies

December 2009

YTD

Annual Average Return since January 2001

Annual Std Dev since January 2001

Sharpe Ratio

Convertible Arbitrage

2.18%

46.9%

6.5%

7.8%

0.32

CTA Global

-2.75%

-2.1%

7.3%

8.8%

0.38

Distressed Securities

3.65%

30.9%

11.1%

6.2%

1.14

Emerging Markets

2.32%

37.9%

12.5%

10.8%

0.79

Equity Market Neutral

0.84%

5.2%

4.7%

3.1%

0.23

Event Driven

2.57%

26.0%

8.5%

6.0%

0.74

Fixed Income Arbitrage

1.30%

24.4%

5.7%

4.8%

0.37

Global Macro

-0.30%

10.3%

7.7%

4.5%

0.82

Long/Short Equity

1.99%

20.2%

5.7%

7.1%

0.24

Merger Arbitrage

1.04%

10.0%

5.6%

3.4%

0.46

Relative Value

1.65%

21.2%

6.6%

4.9%

0.53

Short Selling

-3.66%

-20.5%

2.3%

13.9%

-0.12

Funds of Funds

0.70%

10.7%

4.4%

5.2%

0.07

* Cumulative return since January 1st of the current year

 

 

 

The EDHEC-Risk Alternative Indexes use factor analysis techniques to provide the best possible one-dimensional summaries of the information conveyed by the competing hedge fund indexes that are currently available on the market. Therefore, they can be thought of as a set of hedge fund indexes providing a cross section of existing indexes for each hedge fund strategy. www.edhec-risk.com


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