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EDHEC: Hedge Fund Strategies Consolidate Their Performances

Date 07/01/2021

EDHEC has published the latest performance update of the EDHEC-Risk Alternative Indexes.

The month of November was characterized by a strong rebound in the financial markets, following two declining months. The S&P 500 registered a strong positive return (10.95%), not only erasing previous losses, but also reaching its highest index level since the start of our study period (January 1997). Market implied volatility decreased sharply to 20.57%, exactly matching its long-term average.

On the bond market, the situation also clearly improved, as both regular bonds (0.49%) and convertible bonds (10.37%) posted positive returns. Concerning commodities market, the GSCI Commodity Spot index strongly increased (13.15%) erasing all its losses since the beginning of the COVID-19 crisis. 

The dollar, which had increased in the last two months, recorded a decline (-2.30%).

In this environment, all strategies achieved positive performances. The best performing strategy was Event Driven (6.66%), followed by Long/Short Equity (6.18%). Not surprisingly, these two equity-oriented strategies took advantage of the boom in the equity markets. The lowest performing strategy was Equity Market Neutral (0.33%), followed by Fixed-Income Arbitrage (0.77%). 

Distressed Securities and Event Driven YTD returned positive for the first time of the year, leaving only CTA Global with a negative YTD (-0.48%). Three additional strategies (Emerging Markets, Event Driven and Long/Short Equity) joined the group of strategies which are at their highest index level since EDHEC-Risk hedge fund indices' inception (December 1996), already made up of Convertible Arbitrage, Fixed Income Arbitrage, Merger Arbitrage, Relative Value and Fund of Funds.

Overall, the Funds of Funds strategy posted a strong positive return (3.84%), in line with the market recovery.