Hedge fund strategies ride out stock market fall

Date: Thursday, November 19, 2009
Author: HedgeFunds Review

Convertible arbitrage rode out the poor October performance of risky bonds to return 1.26%, according to the latest set of alternative indexes from Edhec.

The indexes showed convertible arbitrage posted a return of 45.2% for the year to date (YTD) despite October's return to volatility with the first stock market fall since February 2009.

However, long/short equity dropping by 0.94% and equity market neutral strategies fell 0.12%. Both suffered with the fall of the stock market.

Global macro fell slightly (0.04%) for October although the strategy recorded a solid 8.9% YTD.

Fixed income registered a tenth month of profitability, up 1.94%, nearing its highest level from October 1997.

While short selling had a negative return of 15.3% YTD, it produced the strongest performance in October of 3.4%.

Fund of hedge funds (FoHFs) fell 0.05%. Despite this they outperformed the stock market which fell 1.86% in the month.

Edhec alternative indexes - overview October 2009

Hedge fund strategies	October 2009 (%)	YTD (%)	Annual average return since January 2001 (%)	Annual std dev since January 2001 (%)	Sharpe ratio
Convertible Arbitrage	1.26	42.7	6.2	7.9	0.28
CTA Global	-1.39	-2.5	7.4	8.8	0.39
Distressed Securities	1.38	23.8	10.6	6.2	1.07
Emerging Markets	1.11	32.8	12.3	10.9	0.76
Equity Market Neutral	-0.12	4.1	4.7	3.1	0.22
Event Driven	0.33	20.9	8.1	6.0	0.68
Fixed Income Arbitrage	1.94	21.7	5.6	4.8	0.33
Global Macro	-0.44	8.9	7.7	4.5	0.82
Long/Short Equity	-0.94	16.2	5.4	7.2	0.19
Merger Arbitrage	0.30	8.2	5.5	3.4	0.43
Relative Value	0.33	18.2	6.4	4.9	0.49
Short Selling	3.40	-15.3	3.0	14.0	-0.07
Funds of Funds	-0.05	9.2	4.3	5.2	0.06

* Cumulative return since January 1st of the current year. Source: Edhec