November was marked by a sharp fall in stock markets, as can be seen from the average returns of the S&P 500, in spite of a rally at the end of the month in anticipation of an imminent reduction in the US Treasury's intervention rate.

Market volatility increased dramatically in the month of November (+23.5%) and almost reached the levels of last summer during the sub-prime crisis. The fixed income markets also recorded a significant increase while producing their fifth positive monthly performance in a row. Commodity prices fell slightly but remained at historically high levels.

In this context, the performances of hedge fund strategies were globally negative, with the exception of CTA global (+0.45%) and equity market neutral (+0.21%). CTA global managers were able to take advantage of the solid returns of the fixed-income markets and the high volatility in the stock markets.

The equity-orientated strategies (event driven and long/short equity) were logically characterised by strongly negative returns. Long/short equity managers (-2.15%) posted their worst performance since May 2006 while event driven managers (-2.08) had their worst month since July 2002. Convertible arbitrage managers (-1.77%) were not able to benefit from the return to high levels of volatility and produced their poorest performance since April 2005.

Fabrice Tahar is a research analyst with the EDHEC Risk and Asset Management Research Centre