Thu, Sep 21, 2017
A A A
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


Bg

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. Asia - Hedge funds used to love shorting China. Now, not so much, Fledgling China FoFs require careful use: NCSSF, Amac, Japanese banks turn to PE, hedge funds for returns[more]

    Hedge funds used to love shorting China. Now, not so much From Bloomberg.com: A sharp devaluation. A credit crisis. And an economic hard landing. That's what some of the biggest names in the hedge fund industry were predicting for China after the nation's stocks and currency tumbled in 2

  2. Launches - Orchard launches new credit platform, ETN based on hedge fund to launch on the LSE[more]

    Orchard launches new credit platform Orchard Platform has rolled out Deals as a part of its new platform launch. With the addition of Deals to their suite of technology solutions for loan originators and institutional investors, Orchard Platform takes the next step in their evolution. De

  3. Neuberger Berman closes $1.1bn Credit Opportunities Fund[more]

    Neuberger Berman, a private, independent, employee-owned investment manager, announced that NB Private Equity Credit Opportunities Fund LP closed on $1.1 billion of limited partner commitments. The Fund seeks to invest in the secured and unsecured debt of private equity-backed companies, primarily i

  4. Capital Dynamics launches mid-market private credit business[more]

    Capital Dynamics, a global private asset manager, has launched a dedicated Private Credit Asset Management business. Experienced industry executives Jens Ernberg and Thomas Hall have joined Capital Dynamics to co-lead the company's new private credit initiative. They are based in Capital Dynamics' N

  5. ...And Finally - FAN-antic[more]

    From Newsoftheweird.com: Jeffrey Riegel, 56, of Port Republic, New Jersey, left 'em laughing with his obituary's parting shot at the Philadelphia Eagles. In it, Riegel asked that eight Eagles players act as pallbearers, "so the Eagles can let me down one last time." Riegel owned season tickets for 3