HFRX Indices August 2011 performance notes

Resource: https://www.hedgefundresearch.com/

Financial markets continued to experience volatility relating to concerns about US debt ceiling, acceleration of the ongoing European sovereign debt crisis and overall weakening of US economy in recent months. Global equity markets experienced significant declines, with weakness concentrated in European markets, while gold continued to set new records, despite volatile retracements throughout August. The US dollar gained against most major currencies, with notable exception of the Swiss franc which rose significantly during the month. The HFRX Global Hedge Fund Index declined by -3.47% for August, with losses across most strategies only partially offset by Macro Systematic exposure. The HFRX Absolute Return Index, which includes constituents exhibiting low correlation to traditional market benchmarks, posted a more narrow decline of -0.94% for August.

The HFRX Macro Index declined -0.09% for the month with negative contributions from discretionary and active trading strategies, only partially offset by gains across systematic, commodity and currency exposure. Strong trends in gold, oil and fixed income drove gains with the HFRX Systematic Diversified Index gaining +0.71% for the month. Macro discretionary strategies experienced mixed performance with gains in commodities and US dollar and Asian currencies offset by losses in short fixed income positioning.

The HFRX Equity Hedge Index posted a decline of -5.64% for August from negative contributions from all sub-strategies; August losses represented the 4th consecutive decline for Equity Hedge, only the 2nd such period in Index history. Weakness was broad based across Energy, Financials, Emerging Markets, European and US large cap exposure, with only more modest declines in Asian exposure. Equity market neutral strategies also experienced declines on the increase in volatility, with the HFRX Equity Market Neutral Index declining by -2.46%.

Also posting the 4th consecutive month of declines, the HFRX Event Driven Index declined by -4.05% for the month, with negative contribution from all ED sub strategies. Equity sensitive Special Situations and credit sensitive Distressed experienced the sharpest losses, with the HFRX Special Situation Index and Distressed Index declining by -3.69% and -4.03%, respectively. Despite deal spread widening, losses were more modest across corporate M&A, with the HFRX Merger Arbitrage declining -0.76%.

The HFRX Relative Value Arbitrage Index declined -3.58% in August, with declines across all sub-strategies. Weakness in corporate fixed income contributed to losses across RVA sub-strategies, as credit spreads widened and treasury yields fell. The HFRX RVA Multi-Strategy Index and the HFRX Convertible Arbitrage Index posted declines of -2.37% and -1.60%, respectively. Exposure to Asian and Latin American fixed income as well as yield alternative MLP exposure posted more modest declines.

Comments reference performance as published September 6, 2011.