September was characterised by continuing strong performance from stock markets, with a slight increase in the average returns of the S&P 500 compared to the previous month. Volatility remained at the same level as last month, still close to its historical lows. Bond market performance exhibited a strong decrease, but remained positive. Commodity price levels continued the fall that began last month, but remained very high. In this environment, all strategies posted positive returns except CTA Global, which exhibited a negative return of -0.57%, but only convertible arbitrage exhibited performance above its average historical mean. This strategy is also the best-performing for the month with a return of 1.44%. All other strategies performed quite poorly, with a return of 0.35% for event driven, a return of 0.07% for both equity market neutral and long short equity, and a zero return for funds of funds.

The poor performance of CTA Global managers may be explained by the fall in commodity prices, as well as by the relatively weak performance of bond markets. Also unfavourable for this strategy were the low levels of implied volatility. Convertible arbitrage managers continued to improve their performance, benefiting again from performance of stock markets.

Equity-oriented strategies all posted weak but positive returns. More specifically, equity market neutral and long short equity exhibited flat returns with 0.07%, far from their average performance over recent years.

Compared to last month, event driven and long/short equity exhibited a considerable decline in their returns, after their good performance of August. Although they benefited from the strong positive stock market return in September, all these strategies were penalised by the underperformance of small cap stocks.

Mathieu Vaissié is research engineer with the Edhec Risk & Asset Management Research Centre