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Edhec indices see emerging markets well on top in 2007

The asset and risk management research centre of French business school Edhec has reported that three of the hedge fund strategies it monitors - event-driven, merger arbitrage and convertible arbitrage - lost ground in December, but all 13 ended 2007 in positive territory.

The best full-year performers were emerging markets with 20.8 per cent, global macro with 13 per cent and CTA global and funds of hedge funds each with 10 per cent. The most lacklustre strategies were convertible arbitrage with 3.7 per cent and fixed-income arbitrage with 6.1 per cent.

Edhec says December was marked by a moderate decline in the stock markets, despite the economic prompting anticipation of a new reduction in the US Federal Reserve's intervention rate. Market volatility remained almost stable at a historically high level very close to its peak last summer at the height of the sub-prime shock.

The fixed-income market recorded a negative performance for the first time in six months, probably as a result of disappointment at an interest rate cut of only 0.25 per cent, the Edhec centre says. Commodity prices climbed to new historic highs with an overall gain of more than 5 per cent.

Against this backdrop, the hedge fund strategies monitored by Edhec produced mixed performance last month. CTA managers gained 1.23 per cent, benefiting from the record commodity prices and the high degree of volatility in the stock markets.

Despite the negative performance of stock markets as a whole, long/short equity managers delivered a positive performance of 0.49 per cent, thanks to solid returns from non-cyclical and technology stocks. The worst-performing strategy was convertible arbitrage, which saw a decline of 0.90 per cent, while the strongest performance came from emerging markets with 1.27 per cent.

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