EDHEC has released the latest performance update of the EDHEC-Risk Alternative Indexes.
The month of February was characterized by a strong market turmoil caused by the coronavirus global crisis. The S&P 500 index registered a severe decline (-8.23%), its biggest drop in a month since December 2018, bringing it back to its September 2019 level. Volatility jumps from 18.84% to 40.11% in a month, reaching double its historical mean value and its highest level since September 2011.
On the bond market, a mixed situation prevailed as regular bonds post positive return (1.02%), while convertible bonds post negative return (-2.07%). Concerning commodities market, the GSCI Commodity Spot index decreased sharply (-7.81%) for the second consecutive month, dropping to its lowest level since September 2016.
The dollar is rising (1.11%) for the second consecutive month.
In this environment, ten strategies among thirteen posted negative returns. Convertible Arbitrage, Fixed-Income Arbitrage and Short Selling were the three exceptions doing well with positive returns. In addition, Convertible Arbitrage and Fixed-Income Arbitrage were still being at their highest index level since EDHEC hedge fund indices' inception (December 1996).
The best performing strategy was Short Selling (2.96%), which performs greatly above of its long term average performance, followed by Convertible Arbitrage (0.80%). The equity-oriented strategies were negatively impacted by the downturn in the stock market. The lowest return was the -2.49% reported by Event Driven, followed by Long/ Short Equity (-2.37%). The third equity-oriented strategy, namely Market Neutral, also posted a negative return (-1.03%), but to a lesser extent.
Overall, after four months of positive returns, the Funds of Funds strategy posted a negative return (-1.32%). However, all hedge-fund strategies clearly outperformed the S&P 500 Index.
