May was a continuation of April's strength in the global economy and world equity markets. The S&P 500 index progressed by 3.25% while volatility, measured by the implied volatility index VIX, showed a slight decrease and remained close to its historical lows. The broad bond market moved lower again as strong economic data foreshadowed the need for more interest rate hikes.
The strong positive returns of the stock market again allowed equity-oriented strategies to post good performance for May (respectively 2.13%, 2.39% and 1.26%) ignoring the mixed data published on corporate investments. Instead, managers chose to focus on the solid earnings growth published by companies, overshadowing concerns on a weakening economy and high energy prices.
In this environment, all strategies posted positive returns. What is more, all the positive returns were clearly above the historical average returns of their respective strategy. Compared to the other strategies, the fixed income arbitrage index performed modestly in May (0.61%) because rates were largely higher all over the world and the time yield curve steepened.
Event driven continued to show strong positive returns (2.13%), benefiting from continually rising levels of capital spurring corporate restructurings, merger and buyouts.
Mathieu Vaissié is research engineer with the Edhec Asset Management Centre in Nice
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