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In March, the stock markets continued to rise for the fifth consecutive month with significant momentum. The S&P 500 gained 3.75%, registering a 10.61% progression during the first quarter of 2013. Equity implied volatility dropped sharply, reaching a five-year low of 12.7%. High-grade bonds were mixed but almost unchanged (Lehman Global: 0.10%, Lehman US: -0.21%), credit spreads were flat (index: 0.04%) and convertible bonds rebounded vigorously, benefiting from their equity component (1.34%). Commodities scored a modest 1.05% gain. The dollar, finally, maintained some momentum with a 0.79% return.
Equity-focused strategies all exhibited robust returns, however characterized by a wide dispersion in terms of dynamic alphas. The Long/Short Equity strategy (1.57%) performed in line with its modelled dynamic exposure, the Equity Market Neutral strategy (0.26%) showed mildly negative alpha, whereas the Event Driven strategy (1.52%) produced a very strong idiosyncratic return possibly indicative of market timing effects or hidden risk premia.
The Convertible Arbitrage strategy (0.83%) extended its winning streak to ten months despite convertible bonds being the single beneficial exposure among its risk factors, and falling short of explaining the full magnitude of its performance. The CTA Global strategy (1.02%) compensated for last month’s loss. The Funds of Funds strategy finally, scored a fair 0.96% gain, considering its market exposure.
Click here to download March's performance update of the EDHEC-Risk Alternative Indexes.
