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HFRX Global Hedge Fund Index down -1.11% in mid-February (-3.85% YTD)

Monday, February 22, 2016
Opalesque Industry Update - Global financial markets posted declines through mid-February as investor risk aversion increased and oil and equity volatility remained elevated after steep January losses. Global equity markets were led by steep intra-month losses across Technology, Biotechnology and Financials, though losses were narrowed through mid-month. Oil also posted steep losses through mid-month, though these were also narrowed on expectations for supply cuts; gold rose sharply through mid-month after gaining in January, while platinum and silver also gained.

US Treasury yields fell as the investors reduced expectations for near term rate increases by US Federal Reserve while high yield credit widened and the US Dollar fell against most currencies. Hedge funds posted mixed performance as Macro & CTA gains again offset losses in directional strategies with the HFRX Macro Systematic Diversified CTA Index gaining +2.15% and the HFRX Macro Index gaining +0.07% through mid-month. The broad-based HFRX Absolute Return Index declined -0.7% through mid-Feb, while the HFRX Global Hedge Fund Index posted a decline of -1.11%.

HFRX Macro/CTA Index posted a gain of +0.07% through mid-February, with contributions from quantitative, trend-following, systematic CTAs managers, partially offset by Discretionary Fixed Income and Emerging Markets strategies. The HFRX Macro Systematic Diversified/CTA Index gained +2.15% as Energy continued to slide before partially recovering by mid-month, interest rates declined and the US Dollar fell against most major currencies while equities partially recovered from earlier losses.

HFRX Relative Value Arbitrage Index posted a decline of -0.55% through mid-February, as high yield credit and arbitrage deal spreads widened. The HFRX Convertible Arbitrage Index posted a gain of +0.30%, as gains in implied volatility in the Industrial, Communications and Financial sectors were partially offset by declines in credit positions. The HFRX Multi-Strategy Index declined -0.57% for the period, with declines concentrated in Mortgage, Financial and Technology sectors.

HFRX Event Driven Index posted a decline of -1.65% through mid-February, as credit spreads widened. The HFRX Merger Arbitrage Index had a decline of -0.48% through mid-month with core exposures to Meiji Yasuda/StanCorp, AXIS Capital/PartnerRe, Schlumberger/Cameron and Newell Rubbermaid/Jarden transactions. The HFRX Special Situations Index declined -1.44% from positioning in Baxalta, Time Warner, Solera, Yahoo, Diamond Resorts and Akorn.

HFRX Equity Hedge Index posted a decline of -2.00% through mid-February as equity markets fell sharply through mid-month with extreme volatility in Financials, Technology, Biotech and Energy sectors. The HFRX Market Neutral Index declined -2.08% for the period from declines in mean reverting, factor based strategies and fundamental managers. The HFRX Fundamental Value Index declined –1.69% from exposure to large-cap Industrial, Financial and Communications sectors.

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