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In August, as in July, the stock market experienced a month of strong performance. The S&P 500 registered a 7.19% profit, not only erasing all its losses since the beginning of the year, but also registering a 9.74% profit over this period. Market implied volatility increased to 26.46%, a value higher than its long-term average (around 20%), but below its year-to-date average level (around 32%).
On the bond market, a mixed situation prevailed, as regular bonds posted negative return (-0.42%), while convertible bonds posted a strong positive return (+5.50%) for the fifth consecutive month. Concerning commodities, the GSCI Commodity Spot index posted a positive return (5.41%) for the fifth consecutive month, erasing part of first quarter losses and coming back to February 2020 level.
The dollar recorded a fifth consecutive decline (-1.50%).
In this environment, all strategies except CTA Global, delivered positive returns. The best performing strategy was Short Selling (4.17%), followed by Event Driven (3.19%), the latest benefiting from the strong positive performance of the stock market. Long/Short Equity (2.83%), an equity-oriented strategy, as Event Driven, also benefited from this strong performance. The lowest performing strategy was CTA Global (-0.33%), followed by Equity Market Neutral (0.15%).
The significant recovery observed for four months, gradually compensate the losses experienced since the beginning of the year. The year-to-date returns are now positive, except for three strategies (Distressed Securities, Event Driven and Merger Arbitrage). Seven strategies – one more than the previous month – namely Convertible Arbitrage, Emerging Markets, Fixed Income Arbitrage, Global Macro, Long / Short Equity, Relative Value 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 (2.03%), still in line with the market recovery.
