Weak start to Q2 for hedge funds

Date: Tuesday, May 22, 2012
Author: Wendy Chothia, HedgeWeek

With the exception of a stable CTA Global strategy and a profitable Fixed Income Arbitrage strategy, all the major hedge fund strategies in the EDHEC-Risk Alternative Indexes finally registered losses after a first quarter of positive but waning performances.

The strong progression of the LGBI, along with a receding dollar, did not make up for the moderate setback of the commodities market and the CTA Global strategy (-0.01%) only managed stability in the end. The shrinking credit spread and increasing default spread outweighted the negative performance of convertible bonds to sustain the growth of the Fixed Income Arbitrage strategy (+0.50%).

Despite the retreating stock market, overcome by the negative performance of risky bonds and a contraction in the credit spread (-0.38%), the Convertible Arbitrage strategy (-0.23%) did not manage profitability. The Equity Market Neutral strategy (-0.08%) exhibited relatively poor performance, as expected from a limited but statistically significant exposure to the equity market. The Event Driven strategy (-0.14%) registered a moderate loss whereas, significantly impacted by the Small-Cap vs. Large-Cap factor (-0.64%), the Long/Short Equity strategy (-0.65%) even failed to outperform the S&P 500 index.

Overall, the Funds of Funds strategy (-0.27%) managed a limited loss, which was about half that of the S&P 500 index.