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The month of January was characterized by a decrease on the stock markets, following two months of strong performance, with the S&P 500 posting a negative return (-1.01%). Market implied volatility jumped to 33.09%, a value higher than its average performance over the last twelve months (around 31%), and much higher than its long-term average performance (around 22%);
On the bond market, a mixed situation prevailed, as regular bonds posted a negative return (-0.52%), after two consecutive months of positive returns, and convertible bonds posted a positive return (0.95%) for the fourth consecutive month. Concerning commodities market, the GSCI Commodity Spot index produced a strong performance (5.26%) for the third consecutive month;
The dollar rose (0.61%) after two consecutive months of decrease;
In this environment, most of the strategies delivered positive returns. The three exceptions were CTA Global, Long/Short Equity and Funds of Funds. These strategies are also the three only one that are not at their highest index level since EDHEC-Risk hedge fund indices' inception (December 1996);
The best performing strategy was Merger Arbitrage (3.52%), followed by Convertible Arbitrage (2.47%) and Distressed Securities (2.39%). The lowest performing strategy was Funds of Funds (-0.95%), followed by CTA Global (-0.32%). Long/Short Equity (-0.09%) was negatively impacted by the downturn in the stock market, but in a moderate way. Among the two other equity-oriented strategies, Market Neutral (0.03%) succeeded in maintaining a barely positive performance, and Event Driven stood out from the two others with a positive return of 1.68%;
Overall, after three months of positive returns, the Funds of Funds strategy posted a negative return (-0.95%), in line with the market performance, however slightly outperforming the S&P 500 index.
