After three months of significant losses, the stock markets managed a positive return (+1.06%) in December, with volatility remaining high (40%), albeit down to two-thirds of November’s level. Over the year, the S&P500 index registered a record loss of 37%.
Once again, the commodities market registered a double-digit loss (-10.65%), which brought it back to its level of January 2005. In December, the Lehman Global Bond index recorded a second consecutive positive month (+3.39).
After six months of losses, the convertible arbitrage strategy managed a positive return (+1.70). This is mostly due to convertible bonds, which ended the year with an unusual gain of +7.67%, their best since October 1998. The CTA strategy achieved a fourth consecutive positive monthly return (+1.45%) even though it slipped over the last quarter.
The good result of the stock markets had a positive impact the equity-oriented strategies. Equity market neutral and long/short equity finally managed positive returns after five months of losses. The event-driven strategy cut its losses (-0.70%) but remained negative.
Over the year the CTA strategy managed a positive yearly return (15.65%). The other strategies all yielded negative yearly returns.
Patrice Retkowsky is research engineer with the EDHEC Risk and Asset Management Research Centre in Nice