Opalesque Industry Update - Global equity markets posted gains for the 3rd consecutive month in August, with significant sector contributions from Energy and Telecom and geographic contributions from Italy and Spain; Asian equities experienced mixed performance. Trading volumes declined throughout the month, as implied volatility declined despite an early month spike associated with a trading loss at a large US executing broker dealer. US yields rose and the yield curve steepened as investors discounted optimism with regard to the resolution of the European sovereign debt crisis; the US dollar declined against the Euro and Pound, despite rising against the Japanese Yen. Oil, Gold and most precious metals posted gains while Agricultural Commodities posted declines on drought relief. Hedge funds also posted the 2nd consecutive month of gains, with the HFRX Global Hedge Fund Index gaining +0.51% with contributions from Equity Hedge and Event Driven strategies; the HFRX Market Directional Index gained 0.82% for the month.|
The HFRX Event Driven Index posted a gain of +0.92% in August, with contributions from Equity Special Situations, Activist and Credit Arbitrage strategies only partially offset weakness in Distressed exposure. The HFRX ED Special Situations Index had the strongest contribution to ED performance, gaining +1.21% on positive developments in transactions in the Consumer, Technology/Media and Energy sectors. The HFRX Merger Arbitrage Index posted a gain of +0.16% for the month with contributions from core positions in Hertz/Dollar Thrifty, Glencore/Xtrada, Glencore/Viterra and Duke Energy/Progress Energy. The HFRX Distressed Index declined -0.34% despite improving credit markets, with negative contributions from idiosyncratic positions in US and Emerging Markets.
The HFRX Equity Hedge Index posted a gain of +0.84% in August, with core contributions across both Value & Growth sub-strategies. The HFRX Fundamental Value Index gained +0.71%, with significant contributions from exposure to Energy, Telecom, Financials and European equities. The HFRX Fundamental Growth Index posted a gain of +0.52% with contributions from Asian, Technology and Renewable Energy areas. Gains in fundamental market neutral managers were offset by weakness in trading oriented strategies, with the HFRX Market Neutral Index posting a modest decline of -0.08% for the month.
The HFRX Relative Value Arbitrage Index posted a gain of +0.20% in August, with contributions from Convertible, Corporate Credit and MLP strategies as US yields rose and credit tightened. The HFRX Convertible Arbitrage Index gained +0.67% as spread tightening offset rising yields and falling volatility and with core contribution from Japanese exposure; YTD the Index has gained +5.89%. The HFRX MLP Index gained +1.77% on strong demand for transport and storage across Energy commodities as weather considerations raised production/supply concerns. The HFRX Fixed Income Credit also employed effective hedging to offset rising yields, posting a gain of +0.52%.
The HFRX Macro CTA Index posted a modest decline of -0.02% in August with positive contributions from Discretionary Commodity and Multi-strategy exposures offset by weakness in trend following CTA strategies. Discretionary Macro managers benefitted from tactical positioning in Commodities and short Fixed Income positioning, which were only partially offset by Currency exposures. Systematic Macro strategies also experienced weakness in Currency exposures, with declines in Agricultural Commodities also contributing to weakness; the HFRX Systematic Diversified CTA Index posted a decline of -1.54% for the month. Full performance table: Source