The month of June was characterised by flat returns on the stock markets, and volatility, still at a low historical level, remained fairly stable. Although the bond market continued its downward trend, returns were insignificant and volatility continued to be stable. Commodity prices increased significantly from their historical mean, driven by the recent uncertainties.
The highest positive return came from the equity market neutral strategy with 0.88%, while the highest negative return was posted by the CTA strategy at -1.17%, the latter remaining highly affected by developments in the commodities and bond markets.
Bond returns continued to contribute significantly to this underperformance, while volatility remained at a low level.
The low return of the convertible arbitrage strategy could be linked to the poor performance of the stock markets during the month of June.
Compared to the month of May, the three equity-oriented strategies (equity market neutral, event driven and long/short equity) posted improved returns, which could be linked to the recent developments in the stock markets.
The long/short strategy, however, remained on the downside with a return of -0.51%, which could be explained by two principal factors: implied volatility and credit spread.
The equity market neutral managers improved their performance significantly, benefiting from higher T-Bill rates.
As the differential between small and large caps remained positive in June, hedge fund managers remained highly exposed. Correlations with credit spread remained significantly negative and high.
Mathieu Vaissié is research engineer with the Edhec Risk and Asset Management Research Centre