Sat, Oct 22, 2016
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

New Credit Suisse/Tremont commentary offers insight into May hedge fund performance

Friday, June 18, 2010
Opalesque Industry Update - The Credit Suisse/Tremont Hedge Fund Broad Index posts -2.76% in May as volatility and risk aversion rise

Whereas nine-out-of-ten hedge fund strategies in the Index were positive in April, nine-out-often strategies were negative in May as volatility almost tripled from April lows (as measured by the CBOE VIX volatility index). Market volatility was driven by a number of factors and events that unfolded throughout the month, the most dominant of which was the sovereign risk situation affecting peripheral European economies.

The Index’s performance of -2.76% represents the first month of negative performance since February 2009, and the worst monthly performance since November 2008 when the index fell 4.15% in the wake of the Lehman bankruptcy. Nonetheless, hedge funds’ ability to position defensively allowed them to outperform equity market indices such as the S&P 500 Total Return Index (-7.99%) and the MSCI World Index (-9.77%) by margins of more than 5% and 7%, respectively. The widespread risky-asset sell-off led to rising correlations between and within asset classes which negatively impacted many managers across different strategies.

Here is a short summary of major events that impacted markets in May:

• May 2, European governments agreed on a €110 billion bailout for Greece (US $134 billion);

• May 6, a flash crash occurred in US stock markets and the Dow Jones Industrial Average dropped 1000 points in 20 minutes before bouncing back;

• May 10, the European Union announced a €750 billion bailout plan (almost US $1 trillion);

• May 18, Germany unilaterally implemented a ban on shorting of ten financial stocks and Eurozone bonds, causing a market drop;

• May 20, North Korea threatened an “all-out war” in response to South Korea’s claim that they torpedoed a South Korean warship, and the VIX Volatility Index reached a 10-month intra-day high of 45 following its two-year low of 15.5 in mid-April (see Figure 1, left-hand axis);

• May 28, Fitch Ratings downgraded Spain’s AAA sovereign credit rating, negatively affecting the euro. As a result of “flight-to-safety” moves by investors buying US Treasuries, the US dollar strengthened versus the euro to levels last seen on October 27, 2008, when it was at $1.24 (see right-hand axis in Figure 1). Additionally, the oil spill in the Gulf of Mexico, regulatory reform in the US, and tensions in the Middle East contributed to investor uncertainty.

Full report: Source


What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. M&A - U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga, Hedge fund Parvus shows hand, toppling William Hill merger deal[more]

    U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga From The fierce battle to buy Britain's biggest private equity group has come to an unexpected conclusion, with the original bidder walking away with the prize. SVG Capital has agreed

  2. Marc Lasry: Energy is still a phenomenal opportunity[more]

    From Distressed debt specialist Marc Lasry said energy debt is still a "phenomenal opportunity" because investors can get "massively overpaid" for the risk they take on. There are "huge opportunities" in the energy sector especially in restructurings, the Avenue Capital Group CEO said Tues

  3. Opalesque Exclusive: Ex-SAC manager re-emerges with market neutral hedge fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: A manager re-emerged from the SAC battleground last year to launch his own hedge fund under the umbrella of New York-based investment firm Endicott Group.

  4. North America - Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation, Billionaire hedge fund titans Dinan, Lasry on election, markets and best investment ideas[more]

    Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation From Kyle Bass, founder of Hayman Capital Management, on Wednesday warned that the U.S. is headed toward so-called stagflation. Stagflation is typically described as persistently high inflation and hi

  5. Other Voices: Follow the advice of investment consultants - I think not[more]

    Mark Rzepczynski, Founding Partner, Chief Investment Officer AMPHI Research and Trading, writes on Harvest Exchange: Investment consultants are a force to the reckoned with in the pension world. They advise and drive many pension decisions around the globe. Consultants literally control trillion