September was remarkable on the stock markets for the most significantly negative return (-8.91%) and the highest volatility (39%) over the past six years. Posting an even worse loss than in June, the S&P500 has now returned to its level of October 2005. With its third consecutive fall, also the greatest since March 2003, the commodities market has now returned to its level of early 2008. On the flipside, with a return of 0.61% for the Lehman Global Bond index, the fixed-income market registered a fourth consecutive positive return, although about half of last month's.
In this severe context, all hedge fund strategies posted negative returns for the third consecutive month. Even more remarkable is that three strategies, namely convertible arbitrage, equity market neutral and long/short equity, registered their most negative returns in the history of the indices.
With a double-digit negative return (-10.65%), the convertible arbitrage strategy was mostly affected by the convertible bond market, which had its most spectacular fall (-13%) since the creation of the index. The very bad prevailing situation in the stock markets significantly affeccted the equity-oriented strategies - event driven, equity market neutral, and long/short equity - as they hit their most severe loss over the past 10 years.
Patrice Retkowsky is research engineer with the EDHEC Risk and Asset Management Research Centre
No comments yet