NEW YORK - (Business Wire) Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) will finish almost flat with a +0.17% return in October (based on 71% of assets reporting). Hedge funds had a slightly positive month overall with a widening dispersion of returns among strategies, based on whether managers could take advantage of October’s market volatility. The Chicago Board Options Exchange Volatility Index (VIX), that measures the implied volatility of S&P 500 Index options, began a surge of approximately 30% on October 23 that took the VIX from just over 20 to just over 30, as equity markets took a turn downward in the second half of the month. October’s US equity gains for many Long/Short managers were concentrated in the industrial, utilities and health sectors, and from shorting financials. Some managers which have had positive returns in recent months have begun to take profits and wind down for the year, while others which have struggled due to their defensive positions earlier in the year continued to actively seek opportunities arising from the market volatility.
Macro data was mixed, with positive earnings momentum in the US and globally, as well as positive GDP growth figures for the third quarter in the US and China, and encouraging PMI numbers for the Eurozone (except the UK which saw its economy shrink by 0.4% in 3Q). On the other hand, PMI numbers in Singapore slipped to 50.2 from a peak of 54.4 in August, personal spending in the US dropped by 0.5%, and US consumer confidence dropped from 73.5% in September to 70.6%, according to the Reuters/University of Michigan Consumer Sentiment Index.
Certain managers in Equity Market Neutral and Relative Value strategies believe that the increase in market volatility may continue and will likely favor securities pickers who perform fundamental analysis. We believe sideways markets are also generally a better environment for arbitraging rather than long-biased, directional approaches. For example, Merrill Lynch reports that the convertible bond market was down for the first time since January, but Convertible Arbitrage managers had their 11th consecutive month of positive performance as they shifted their focus to arbitraging strategies rather than the long-only-type credit plays that were profitable earlier in the year. Equity Market Neutral managers also experienced a positive month and their performance relative to other hedge fund strategies improved, since its market neutral profile can give the strategy an advantage over those with higher market correlations when volatility rises. Dedicated Short Bias had its first positive month since February, and was the performance leader with 5.86% for the month, while many Managed Futures managers gave back some of the profits of the previous two months.
| Strategy Estimates | | | | | | |
| | | | | | |
| Index | | Oct-09 | | Sep-09 | | YTD |
| CS/Tremont Hedge Fund Index | | 0.17% | | 3.04% | | 15.16% |
| Convertible Arbitrage | | 1.90% | | 3.23% | | 45.64% |
| Dedicated Short Bias | | 5.75% | | -5.27% | | -18.53% |
| Emerging Markets | | 1.37% | | 4.94% | | 26.37% |
| Equity Market Neutral | | -0.53% | | 0.96% | | 4.70% |
| Event Driven | | 0.43% | | 2.89% | | 15.21% |
| Distressed | | 1.08% | | 3.38% | | 16.01% |
| Event Driven Multi-Strategy | | 0.22% | | 2.52% | | 14.71% |
| Risk Arbitrage | | 0.10% | | 1.60% | | 10.52% |
| Fixed Income Arbitrage | | 2.49% | | 2.77% | | 24.98% |
| Global Macro | | 0.32% | | 2.77% | | 9.43% |
| Long/Short Equity | | -1.18% | | 3.23% | | 15.30% |
| Managed Futures | | -2.23% | | 2.97% | | -6.35% |
| Multi-Strategy | | 1.05% | | 2.86% | | 21.93% |
| MSCI World | | -1.85% | | 3.81% | | 20.21% |
| Barclays Capital Aggregate Bond Index | | 0.47% | | 2.14% | | 8.35% |
| DJ-UBS Total Return Commodities Index | | 3.28% | | 1.57% | | 12.64% |
* All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.
Estimates are based on 71% of assets reporting; final September performance will be published November 15th on Bloomberg and online at www.hedgeindex.com. For a complete description of the Credit Suisse/Tremont Hedge Fund Index, please see the index rules available at www.hedgeindex.com.
Credit Suisse Tremont Index LLC is the joint venture company of Credit Suisse Index Co., Inc., a subsidiary of Credit Suisse Co., Inc., and Tremont Group Holdings, Inc. Credit Suisse Tremont Index LLC is headquartered at 11 Madison Avenue, New York, NY 10010-3629.
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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
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Bode Associates
Meg Bode, 516-869-6610
meg@bodeassociates.com
