Industry Updates

All Edhec hedge fund strategy indices positive in March and YTD except for Short Selling

Thursday, April 18, 2013

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Opalesque Industry Update - In March 2013, the stock markets continued to rise for the fifth consecutive month with significant momentum. The S&P 500 gained 3.75%, registering a 10.61% progression during the first quarter of 2013. Equity implied volatility dropped sharply, reaching a five-year low of 12.7%. High-grade bonds were mixed but almost unchanged (Lehman Global: 0.10%, Lehman US: -0.21%), credit spreads were flat (index: 0.04%) and convertible bonds rebounded vigorously, benefiting from their equity component (1.34%). Commodities scored a modest 1.05% gain. The dollar, finally, maintained some momentum with a 0.79% return.

Equity-focused strategies all exhibited robust returns, however characterized by a wide dispersion in terms of dynamic alphas. The Long/Short Equity strategy (1.57%) performed in line with its modelled dynamic exposure, the Equity Market Neutral strategy (0.26%) showed mildly negative alpha, whereas the Event Driven strategy (1.52%) produced a very strong idiosyncratic return possibly indicative of market timing effects or hidden risk premia.

The Convertible Arbitrage strategy (0.83%) extended its winning streak to ten months despite convertible bonds being the single beneficial exposure among its risk factors, and falling short of explaining the full magnitude of its performance. The CTA Global strategy (1.02%) compensated for last month’s loss. The Funds of Funds strategy finally, scored a fair 0.96% gain, considering its market exposure.

EDHEC-Risk Alternative Indexes:

Hedge Fund Strategies	Mar 2013	YTD	Annual Average Return since January 2001	Annual Std Dev since January 2001	Sharpe Ratio
Convertible Arbitrage	0.83%	2.5%	6.6%	7.0%	0.38
CTA Global	1.02%	1.9%	5.9%	8.4%	0.22
Distressed Securities	1.68%	4.4%	10.5%	6.1%	1.07
Emerging Markets	1.56%	4.5%	10.3%	10.4%	0.61
Equity Market Neutral	0.26%	1.9%	4.4%	2.9%	0.13
Event Driven	1.52%	4.1%	8.0%	5.9%	0.67
Fixed Income Arbitrage	1.42%	3.2%	6.3%	4.2%	0.55
Global Macro	0.74%	2.3%	6.7%	4.3%	0.61
Long/Short Equity	1.57%	5.1%	5.5%	7.2%	0.21
Merger Arbitrage	0.71%	0.9%	5.2%	3.2%	0.38
Relative Value	1.48%	4.0%	6.7%	4.6%	0.59
Short Selling	-1.90%	-6.7%	-1.3%	13.9%	-0.39
Funds of Funds	0.96%	3.4%	3.8%	4.9%	-0.04
* Cumulative return since January 1st of the current year