Opalesque Industry Update, for New Managers - Opalesque Industry Update - Global financial markets declined in August as Emerging Market equities and currencies extended prior month declines, and investors positioned for volatility associated with reduction of stimulus by the US Federal Reserve and uncertainty over possible military conflict in the Middle East. US equities posted the worst monthly decline for 2013, with declines across most sectors led by Large Cap, Financials, Real Estate, Technology and Healthcare. European equities also declined, led by the UK, France & Germany, while Asian equities were mixed with losses in Japan offset by gains in China & Australia.|
Losses across Emerging Markets were widespread across the Middle East, Turkey, Egypt, India, Russia & Thailand, while Brazil and China posted gains partially offsetting prior month losses. Despite the weakness, US government bond yields rose with increases concentrated in shorter maturities as the yield curve flattened. Yields also rose across UK Gilts, German Bunds, the Netherlands and France, while both investment grade and high yield credit widened.
The US Dollar was mixed against developed market currencies, rising against the Euro while falling against the British Pound Sterling, however Emerging Market currencies continued to fall against the US Dollar, with declines led by the Indian Rupee, Mexican Peso, Brazilian Real and South African Rand. Energy and Metals commodities gained on the prospects of supply disruptions, led by gains in Oil, Natural Gas, Silver, Gold and Platinum, while Agricultural commodities generally posted declines led by Coffee, Sugar, and Wheat & Live Hogs.
Hedge funds posted declines for the month with the HFRX Global Hedge Fund Index posting a decline of -0.86% while the HFRX Equal Weighted Strategies Index declined -0.71%. HFRX Relative Value Arbitrage Index declined -0.13% in August, with contributions from Commodity Arbitrage and Convertible strategies offset by weakness in Global Fixed Income exposure. The HFRX RV Multi-Strategy Index posted a modest decline of -0.08% as gains in Commodity Arbitrage strategies were offset by Credit exposures. The HFRX RV: Convertible Arbitrage Index and the HFRX Fixed Income Credit Index both declined -0.49% as credit spreads widened, with weakness in credit, interest rate sensitive positions & Asian convertibles only partially offset by volatility and gamma positions.
HFRX Event Driven Index posted a decline of -0.54% in August, with positive contributions from Distressed strategies offset by weakness in equity and credit strategies. The HFRX Distressed Index gained +0.09% for the period with contributions from various restructurings across Energy, Industrial & Consumer Durable exposures, while the HFRX Merger Arbitrage Index posted a modest decline of -0.03%, with contributions from transactions in Sprint/Clearwire, Akorn/Hi-Tech Pharmacal, MAA/Colonial Properties, First M&F/Renasant, and Thermo Fisher/Life Technologies. The HFRX Special Situations Index declined -0.78% with contributions from exposure to transactions in Industrial and Non-Cyclical sectors and specific contributions from core positioning in Apple, J.C. Penney, Tribune Co., American Airlines, US Airways, and Penn West Petroleum.
HFRX Macro Index posted a decline of -0.84% in August, with positive contributions of Multi-Strategy managers offset by mixed performance of quantitative Systematic CTA and Emerging Market exposures. The HFRX Macro: Systematic Diversified Index declined -0.08% with positive contributions from Commodity exposure offset by Currencies and Fixed Income exposures. The HFRX Emerging Markets Index posted a decline of -1.80% with weakness across Currencies, Emerging Asia and Latin America.
HFRX Equity Hedge Index posted a decline of -1.89% in August, with weakness concentrated in US and European equities. The HFRX Fundamental Value Index and the HFRX Fundamental Growth Index declined -2.10% and -1.55%, respectively, with weakness from exposure to large and small cap US, European and Emerging Markets equities only partially offset by short exposures.