Industry Updates

Short selling strategies lead Edhec Indices in June +4.05% (-0.13% YTD), long/short equity worst performer -1.69% (+0.16% YTD)

Monday, July 19, 2010

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Opalesque Industry Updates -

Hedge Fund Strategies	June 2010	YTD	Annual Average Return since January 2001	Annual Std Dev since January 2001	Sharpe Ratio
Convertible Arbitrage	0.29%	3.0%	6.5%	7.7%	0.32
CTA Global	0.20%	-0.5%	6.9%	8.7%	0.33
Distressed Securities	-1.01%	4.5%	11.0%	6.2%	1.12
Emerging Markets	-0.40%	-0.8%	11.8%	10.8%	0.72
Equity Market Neutral	-0.47%	0.7%	4.5%	3.0%	0.18
Event Driven	-1.29%	2.0%	8.2%	6.0%	0.70
Fixed Income Arbitrage	0.90%	4.4%	5.9%	4.7%	0.41
Global Macro	-0.27%	0.5%	7.3%	4.4%	0.75
Long/Short Equity	-1.69%	-1.8%	5.2%	7.2%	0.16
Merger Arbitrage	0.37%	1.7%	5.5%	3.4%	0.43
Relative Value	-0.26%	2.0%	6.5%	4.9%	0.51
Short Selling	4.05%	-0.5%	2.1%	13.9%	-0.13
Funds of Funds	-0.82%	-1.3%	4.0%	5.2%	0.00
* Cumulative return since January 1st of the current year

After a dramatic decline in May, the stock markets fell back strongly again. The S&P 500 index (-5.23%) fell sharply to its level of October 2009 and implied volatility (32.07%) rose for the fourth consecutive month, reaching its level of April 2009.

On the other hand, even though their was still much ground to make up to recover from last month’s spectacular blow, the commodities market managed a significant positive return (+1.43%). The fixed income market covered mixed ground, with regular bonds exhibiting noticeable profits (+1.13%) but convertible bonds remaining in negative territory (-0.93%). The Lehman Global Bond Index (+1.86%) managed its most profitable return over the past fifteen months.

After six months on the rise, the dollar finally fell back (-0.39%) and after last month’s crunch (-2.28%), the credit spread shrank more moderately (-0.57%).

Despite the adverse conditions on convertible bonds and the credit spread, the Convertible Arbitrage strategy managed a positive return (+0.29%). Along with the good results of regular bonds and commodities, the CTA Global strategy recorded a positive yet modest return (+0.20%). After a mishap in May, the Fixed Income strategy (+0.90%) resumed its ascent started in January 2009.

All the equity-oriented strategies suffered from the ongoing slide in the stock markets. Both the Event Driven (-1.29%) and Long/Short Equity (-1.69%) strategies registered significant losses again, although about half the magnitude of May’s dip. The Equity Market Neutral strategy (-0.47%) was naturally less impacted but performed only marginally better than the previous month.

Overall, the Fund of Funds strategy inevitably stumbled (-0.82%). However, in the current depressed situation, all hedge fund strategies clearly outperformed the stock market.

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