Continuing on from the end of 2010, the stock market started the New Year at a steady pace. In a context of implicit volatility (19.5%) that was slightly on the rise but still below 20%, the S&P 500 index (+2.27%) registered a fifth consecutive month of profits.
The fixed-income market also seemed more reasonably animated, illustrated by a stable Lehman Global Bond Index (-0.03%). With a moderate loss, regular bonds (-0.34%) remained in negative territory for a third consecutive month, whereas convertible bonds (+1.65%) generated a profit that was less spectacular than the previous month’s.
The commodity market (+3.71%) continued to rise and, over the past five months, clearly outperformed the stock market with a record cumulative return (+31.27%). The dollar fell again (-1.50%), back to its level of October 2010 (the lowest level since July 2008).
In January, sustained both by risky bonds and the increasing credit spread (+0.56%), the Convertible Arbitrage strategy (+1.90%) bettered its profits of December. Conversely, the CTA Global strategy (-0.73%) stumbled unexpectedly despite a sharp decline in the dollar and the rising trend of the commodity market.
The equity-oriented strategies all responded positively to the favourable conditions on the stock market and similarly registered a fifth consecutive month of gains. The Equity Market Neutral strategy (+0.50%) managed a modest gain. Despite its smaller exposure to the stock market, the Event Driven strategy (+1.47%) outperformed the Long/Short Equity strategy (0.51%), which was hampered by a shrinking small- minus large-cap return differential (-2.22%).
Overall, the Funds of Funds strategy (+0.16%) started 2011 on a very mild note.
