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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