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The month of October was characterized by a further decline in the markets, following the trend already observed in September. The S&P 500 registered a loss (-2.66%), which did not however erase its important gains of recent months. Market implied volatility jumped to 38.02%, a value higher than its year-to-date average level (around 32%), and much higher than its long-term average (around 21%).
On the bond market, a mixed situation prevailed, as regular bonds posted negative returns (-0.57%) and convertible bonds posted positive returns (0.79%). Concerning commodities market, the GSCI Commodity Spot index decreased (-2.68%) for the second consecutive month.
The dollar rose (0.17%) for the second consecutive month, but in a moderate way compared to September.
In this environment, half of the strategies achieved positive performances. The breakdown between positive and negative performances is roughly the same as last month, to the exception of Funds of Funds, which joined the positive group and Distressed Securities and Short Selling, which joined the negative one. The best performing strategy was Convertible Arbitrage (0.65%), followed by Merger Arbitrage (0.44%). The lowest performing strategy was Short Selling (-0.97%), followed by Global Macro (-0.83%). Two equity-oriented strategies were negatively impacted by the decrease in the stock market: Long/ Short Equity (-0.07%) and Equity Market Neutral (-0.45%). The third equity-oriented strategy, Event Driven, posted a positive return (0.24%).
Five strategies (Convertible Arbitrage, Fixed Income Arbitrage, Merger Arbitrage, Relative Value and Fund of Funds), i.e. two more than last month, were at their highest index level since EHEC-Risk hedge fund indices' inception (December 1996). Merger Arbitrage YTD returned positive for the first time since January, leaving only three strategies with a negative YTD.
Overall, the Funds of Funds strategy posted a positive return (0.26%), despite the market decline.
