Industry Updates

Edhec: performance of hedge fund strategies exposed to equity-related risk factors remained positive in October

Monday, November 19, 2012

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Opalesque Industry Update - In October 2012, stocks experienced a setback (S&P 500: -1.85%), with implied volatility increasing slightly (VIX: 18.6%). High-grade bonds were nearly flat (Lehman Global: -0.17%, Lehman US: -0.06%), risky credit remained strong (credit-spread index: 1.00%) extending its winning streak to 5 months whereas the convertible bonds’ rally was interrupted by a (-0.56%) loss. Commodities fell significantly (-4.20%) while the US dollar bounced back marginally (0.60%).

The performance of hedge fund strategies exposed exclusively to equity-related risk factors remained positive despite the market environment (Equity Market Neutral: 0.34%, Long/Short Equity: 0.25%) thanks to a strong dynamic alpha. The Event Driven strategy, benefiting from additional credit exposure, posted a higher 0.53%.

The Convertible Arbitrage strategy (0.04%) was almost flat, with influences of its main exposures (credit and convertibles) mostly cancelling each other out, and a slightly negative dynamic alpha.

CTA Global (-3.22%) suffered one more huge idiosyncratic loss and remains the worst amongst the main strategies this year so far (-2.95% year-to-date). Funds of Funds, finally, which maintains low overall market exposure, only lost a marginal -0.24%.

Hedge Fund Strategies	Oct 2012	YTD*	Annual Average Return since January 2001	Annual Std Dev since January 2001	Sharpe Ratio
Convertible Arbitrage	0.04%	7.5%	6.5%	7.1%	0.35
CTA Global	-3.22%	-2.9%	5.9%	8.6%	0.22
Distressed Securities	1.35%	10.0%	10.2%	6.2%	1.01
Emerging Markets	0.34%	5.1%	9.9%	10.5%	0.56
Equity Market Neutral	0.34%	2.4%	4.3%	3.0%	0.10
Event Driven	0.53%	6.8%	7.6%	6.0%	0.61
Fixed Income Arbitrage	0.72%	7.5%	6.2%	4.3%	0.51
Global Macro	-0.94%	2.1%	6.6%	4.4%	0.58
Long/Short Equity	0.25%	5.5%	5.1%	7.2%	0.15
Merger Arbitrage	-0.91%	1.6%	5.1%	3.2%	0.34
Relative Value	0.26%	7.4%	6.5%	4.6%	0.53
Short Selling	0.35%	-14.4%	-0.3%	14.0%	-0.31
Funds of Funds	-0.24%	2.7%	3.5%	5.0%	-0.10
* Cumulative return since January 1st of the current year