Opalesque Industry Update - Global financial market volatility continued in July as evidence of slowing economies in the US and China accompanied continued investor concern regarding the European sovereign debt and banking crisis, with recent focus on weakness in Spanish banks. Yields on US and German government bonds declined to record lows as the yield curve steepened on concerns about weak economic growth, additional Eurozone instability and expectations for additional stimulus measures by central banking institutions. |
Global equity markets generally posted gains for the month, with positive contributions from Energy, Oil Services and central European economies, which were partially offset by weakness in US small caps, Southern European and Asian equity markets. Commodities posted gains concentrated in Wheat and Corn on US drought conditions, while Oil and Natural Gas also posted gains. The US Dollar gained against the Euro and GBP, whil e declining against the JPY. Overa ll, Hedge Funds posted gains for July, with the HFRX Global Hedge Fund Index gaining +0.54%, while the HFRX Market Directional Index gained +1.78% for the month.
The HFRX Macro CTA Index posted a gain of +1.48% for July, its highest performance since Nov 2009, with positive contributions from both systematic and discretionary strategies, partially offset by fixed income and discretionary currency exposure. As the impact of the drought in the US continued and energy prices rose, managers captured consistent trends in commodity positions in Agriculturals (Corn and Wheat) and Energy, complemented by gains in Currencies, with the HFRX Macro Systematic Diversified CTA Index gaining +3.23%.
Idiosyncratic exposure to Commodity and Currency generated mixed performance for Discretionary Macro managers, with positive contributions from US and German fixed income, as well as USD positions against the Euro and the Yen.
The HFRX Equity Hedge Index posted a gain of +0.55% for the month, with gains in broad international large cap and technology/healthcare equity, partially offset by small cap, renewable energy and market neutral trading strategies. The HFRX EH: Fundamental Value Index gained +1.38%, its largest performance since Dec 2010, with contributions concentrated in European and US exposure. Equity Hedge also experienced gains in Healthcare, which were partially offset by losses in Energy/Basic Materials. The HFRX Equity Market Neutral Index posted a modest decline of -0.07% as positive contributions from factor-based models were offset by declines in behavioral strategies.
The HFRX Event Driven Index posted a gain of +0.25% for the month from contributions from Distressed/Restructuring, Activist and equity Special Situation strategies, partially offset by mixed performance in Merger Arbitrage exposure. The HFRX Distressed Index posted a gain of +0.45%, bringing YTD performance to +3.50%, with contributions from Emerging Markets and European distressed exposure. The HFRX Merger Arbitrage Index declined -0.20% in July, with mixed performance across core positions in CNOOC/Nexen, Glencore/Viterra, Bristol-Myers/Amylin, Kayak/Palo Alto and Duke Energy/Progress Energy among other Commodity, Healthcare and Technology deal activity.
The HFRX Relative Value Arbitrage Index posted a modest gain of +0.03% for July on positive contributions from Convertible Arbitrage, Corporate Fixed Income and Yield Alternative strategies, offset by Latin American and Commodity exposures. The HFRX Convertible Arbitrage Index gained +1.16%, bringing YTD performance to +5.19% as yields continued to decline and credit spreads tightened. The HFRX RV: Multi-Strategy Index posted a decline of -0.54%, with gains in Emerging Markets sovereign debt offset by weakness in hedged Commodity exposures...Full performance table: Source