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All but two EDHEC hedge fund indices were positive in January, top performers CTA Global and L/S equity

Friday, March 19, 2010
Oplaesque Industry Update - In February, the stock market showed more stability as implied volatility (19.50%) dropped significantly and passed below the 20% mark for the first time since May 2008. The S&P 500 index registered a good performance (+3.10%) that significantly – but not entirely – made up for January’s stumble.

Similarly, the commodities market (+6.54%) recovered partially but significantly from January’s loss (-7.33%). On the fixed-income market, both regular bonds (+0.12%) and convertible bonds (+0.70%) managed positive returns. For the third consecutive month, the dollar (+0.22%) posted a positive but decreasing return. After ten months of a sustained rise, the credit spread flattened out (-0.03%).

In this favourable context, most hedge funds strategies scored positively.

Sustained by the performance of convertible bonds but hampered by the stabilisation of the credit spread, the Convertible Arbitrage strategy managed a positive return (+0.39%), albeit with its smallest gain over the last fifteen months. Like the commodities market, the CTA Global strategy performed well (+0.96%) after December (-2.53%) and January’s (-2.78%) storms.

The performance of the stock market significantly benefited the equity-oriented strategies, as the Long/Short Equity strategy (+0.94%) levelled out January’s loss, and the Event Driven strategy (+0.70%) completed a full year of sustained profits (+27.17%). The Equity Market Neutral strategy managed a fourth month of modest but steady gains (+0.53%).

Overall, the Funds of Funds strategy exhibited a moderate gain (+0.15%) that underperformed the S&P 500 index as well as most hedge fund strategies.

Hedge Fund Strategies February 2010 YTD Annual Average Return since January 2001 Annual Std Dev since January 2001 Sharpe Ratio
Convertible Arbitrage 0.39% 0.9% 6.5% 7.8% 0.32
CTA Global 0.96% -1.8% 7.0% 8.8% 0.34
Distressed Securities 0.47% 2.3% 11.1% 6.1% 1.16
Emerging Markets -0.33% -1.1% 12.2% 10.7% 0.76
Equity Market Neutral 0.53% 0.8% 4.7% 3.0% 0.23
Event Driven 0.70% 1.5% 8.4% 6.0% 0.75
Fixed Income Arbitrage 0.23% 1.9% 5.9% 4.7% 0.39
Global Macro 0.58% -0.3% 7.5% 4.5% 0.79
Long/Short Equity 0.94% 0.0% 5.6% 7.1% 0.22
Merger Arbitrage 0.55% 1.0% 5.6% 3.4% 0.47
Relative Value 0.55% 1.2% 6.6% 4.9% 0.54
Short Selling -2.66% -0.9% 2.1% 13.9% -0.13
Funds of Funds 0.15% -0.2% 4.3% 5.1% 0.05
* Cumulative return since January 1st of the current year

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