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The month of July was characterized by a strong performance of the stock market. The S&P 500 registered a profit of 5.64%, thus erasing all its losses since the beginning of the year. Market implied volatility decreased to 24.46%, a value however higher than its long-term average, which is around 20%.
On the bond market, the situation also clearly continued to improve, as both regular bonds (0.58%) and convertible bonds (6.46%) posted positive returns for the fourth consecutive month. Concerning commodities market, the GSCI Commodity Spot index posted a positive return (4.41%) for the fourth consecutive month.
The dollar recorded a fourth consecutive decline (-3.67%).
In this environment, all strategies delivered positive returns. As last month, the best performing strategy was Emerging Markets (4.54%). The lowest performing strategy was Distressed Securities (0.82%), followed by Merger Arbitrage (1.08%). The strong positive performance of the stock market benefited the equity-oriented strategies such as Long/Short Equity (2.76%), Equity Market Neutral (2.36%) and Event Driven (2.00%).
The significant recovery observed for three months gradually compensate the losses experienced since the beginning of the year. The year-to-date returns are now positive, except for four strategies (Distressed Securities, Event Driven, Merger Arbitrage and Relative Value). Six strategies, namely Convertible Arbitrage, Emerging Markets, Fixed Income Arbitrage, Global Macro, Long / Short Equity and Fund of Funds, are again at their highest index level since EDHEC hedge fund indices' inception (December 1996).
Overall, the Funds of Funds strategy posted a strong positive return (2.17%), still in line with the market recovery.
