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Almost half of EDHEC-Risk hedge fund indices down in January

Thursday, February 18, 2010
Opalesque Industry Update - In January, the stock markets stumbled on the road to recovery begun last March (apart from a mishap in October), and registered a severe loss (-3.60%) in a context of rising implied volatility (24.62%).

On the bond market, the situation is mixed. As with the stock market, convertible bonds lost significant ground (-1.38%) after a positive trend started in March 2009. Conversely, regular bonds returned to profitability (+0.53%) after last month’s unusual losses. After three months of significantly positive but decreasing gains, the commodities market suffered its most severe blow (-7.33%) since the crisis of 2008. The dollar scored positively (+1.46%) and confirmed its result in December. The credit spread rose for the tenth consecutive month (+0.59%)."

"In a context of increasing credit spreads, the Convertible Arbitrage strategy held up against the loss on the risky bond market and managed yet another profit (+0.62%), although this was the smallest in fourteen consecutive months of gains. After an already significant loss in December, the CTA Global strategy fell strongly again (-2.82%), with its most negative return since July 2008, and returned to its level of November 2008.

The equity-oriented strategies performed diversely. Despite the weak performance of the stock market, the Event Driven strategy managed an eleventh consecutive month of profits (+0.74%). Conversely, the Long/Short Equity strategy recorded its second and most strongly negative return (-1.02%) since February 2009. As expected, the Equity Market Neutral strategy was barely affected by the situation on the stock market and performed well (+0.34%)."

In such a poor context, the Funds of Funds strategy could not maintain profitability and recorded a slight loss (-0.21%). However, although some hedge-fund strategies lost ground – in particular the most highly affected CTA Global strategy (-2.82%) –, they all clearly outperformed the S&P 500 Index (-3.60%).

Hedge Fund Strategies

January 2010

YTD

Annual Average Return since January 2001

Annual Std Dev since January 2001

Sharpe Ratio

Convertible Arbitrage

0.62%

0.6%

6.5%

7.8%

0.32

CTA Global

-2.82%

-2.8%

7.0%

8.8%

0.34

Distressed Securities

1.97%

2.0%

11.2%

6.2%

1.16

Emerging Markets

-0.74%

-0.7%

12.3%

10.8%

0.77

Equity Market Neutral

0.34%

0.3%

4.7%

3.0%

0.23

Event Driven

0.74%

0.7%

8.4%

6.0%

0.74

Fixed Income Arbitrage

1.45%

1.4%

5.9%

4.7%

0.39

Global Macro

-0.67%

-0.7%

7.5%

4.5%

0.79

Long/Short Equity

-1.02%

-1.0%

5.5%

7.1%

0.21

Merger Arbitrage

0.59%

0.6%

5.6%

3.4%

0.47

Relative Value

0.54%

0.5%

6.6%

4.9%

0.53

Short Selling

1.85%

1.9%

2.5%

13.9%

-0.11

Funds of Funds

-0.21%

-0.2%

4.3%

5.1%

0.06

* Cumulative return since January 1st of the current year

 

 

 

www.edhec-risk.com


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