Opalesque Industry Update - Global equities continued and extended declines through mid-May, with investors focused on weak US employment data, resurgence of Euro sovereign debt risks and trading losses at a major US financial institution. Most equity sectors posted declines, with Energy, Commodity, Financials and Technology all weak, despite optimism about an upcoming and widely anticipated Technology IPO. Equity declines were also widespread across US, Europe, Asia and Emerging Markets, with few exceptions. US & German bond yields declined across the curve, as yields rose sharply for Euro credits including Spain & Italy. The US Dollar gained against most currencies, while Commodities generally declined, with a notable exception of Natural Gas. Hedge Funds posted declines through mid-May, with the HFRX Global Hedge Fund Index declining -1.22%. The HFRX Absolute Return Index posted a more narrow decline of -0.13%.|
The HFRX Relative Value Arbitrage Index posted a decline of -0.45% through mid-month, with positive contributions from convertible arbitrage strategies and exposure to Latin America. Falling yields and increasing volatility offset credit widening, with the HFRX Convertible Arbitrage Index gaining +0.45% through mid-May. Sovereign and corporate fixed income exposure contributed to mixed performance, while energy infrastructure exposure detracted from performance through mid-May.
The HFRX Equity Hedge Index posted a decline of -2.41% through mid-month, with weakness across most sub-strategies pared YTD 2012 gains. Fundamental growth, value, market neutral and energy exposures all contributed to declines, which were only partially offset by positioning in Asian and factor-based MN exposure. The HFRX Fundamental Growth Index and the HFRX Fundamental Value Index posted declines of -2.92% and -1.66%, respectively. The HFRX Equity Market Neutral Index declined by -0.72% with trading, behavioral-finance strategies and trading oriented strategies posting declines, partially offset by factor based strategies.
The HFRX Macro CTA Index posted a decline of -0.76% by mid-May with negative contributions from macro discretionary strategies with mixed performance across systematic diversified managers. The HFRX Systematic Diversified CTA Index posted a narrow decline of -0.14% through mid-May, with gains in commodity-focused and mixed timeframe models offsetting losses in longer term strategies. Exposure to currencies and commodities contributed to declines across discretionary strategies with these only partially offset by a narrow gain across Emerging Markets.
The HFRX Event Driven Index posted a decline of -1.11% through mid-month, with these also paring YTD '12 gains. The HFRX Distressed Index declined by -0.43%, with declines in global exposures only partially offset by gain in US-focused situations. The HFRX Merger Arbitrage Index posted a decline of -0.66% for the month, with positions in Motorola Mobility, Viterra & Glencore, Kinder Morgan and El Paso contributing to ED results. Credit Arbitrage strategies contributed to mid-month gains, while Activist and Special Situations detracted from performance. Full performance table: Source