February saw another stock market decline, as reflected by the -3.25% return of the S&P 500, its fourth consecutive monthlyA fall that, although less significant than in January, returned it to the level seen a year and a half ago. Market volatility is at its highest level for five years and some three points higher than during last summer's sub-prime crisis. AThe fixed income market performance is still positive, with a return of 1.14% for the Lehman Global Bond Index, but was poorer than in January. Commodity prices registered a rise of around 12%.     In this context, all hedge fund strategies except convertible arbitrage registered positive returns. The best performing strategy was CTA Global, which posted a performance of 6.59%, not very far off its August 1998 historical high of 6.91%. This strategy benefited from the historically high commodity prices.     Convertible arbitrage exhibited negative returns for four months due to the stock market declines over the period. Surprisingly, the three equity-oriented strategies registered strong positive performance in the month, even though they are usually positively exposed to stock market movements. Long/short equity and equity market neutral both exhibited a return of 1.53%, and event driven posted a performance of 1.14%.   Véronique Le Sourd is a senior research analyst with the EDHEC Risk and Asset Management Research Centre.

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