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Global Hedge Funds and Balanced Chart 2: 12-months rolling returns for Greenwich
Global HF Index (red line) and Bond-Equity-
Portfolio Analysis:
Commodity portfolio (45%-45%-10%)
It is interesting to note that a portfolio invested
in Global Hedge Funds (represented by
Greenwich Alternative Investments Indices)
60% P1 P4
50%
2003. 0%
-10%
This is less true since October 2008 where we -20%
can observe a clear return difference. The 12- -30%
Since the launch of the Greenwich Alternative Chart 3: total return for Greenwich Global HF
Investments Indices in 1995, an investment in Index (red line) and Bond-Equity-Commodity
Hedge Funds has produced a return of 300% portfolio (45%-45%-10%)
where an investment in a balanced Bond –
Equity –Commodity portfolio (45%-45%-10%) 450% P1 P4
400%
has produced a return of 100%. 350%
Returns were similar from 1995 to mid 1998. 300%
Chart 5: 12-months rolling returns for Greenwich Charts 5 to 7 show similar patterns for a
Global HF Index (red line) and Bond-Equity- balanced portfolio of Bond – Equity (45%-
portfolio (45%-55%) 55%) as for a balanced Bond – Equity –
Commodity portfolio (45%-45%-10%).
60% P5 P4
50%
In chart 7, it is worth to observe that the
40%
30% volatility of the Bond – Equity (45%-55%)
20%
10%
portfolio has been on average much higher
0% than for Hedge Funds since 2001.
-10%
-20%
-30%
-40%
STRADIVARI HEAT MAP
P e r f.
Vo l at i Co r r . To Ex pe ct e d Te chn i cal s
P e r f. P e r f 1 r e l at i ve t o Di st an ce
lity 1 Gl o b. HF Re co ve r y rel. t o
De c 08 Ye ar Gl o b al HF t o HWM
Ye ar I nd e x P eriod Gl o b al HF
i n de x
Global Hedge Fund Index 1,0% -15,8% 0,0% 9,5% 1,00 19,15% 1,72 0
Market Neutral Group 0,7% -12,2% 3,6% 7,8% 0,97 14,46% 1,40 1
Equity Market Neutral 0,0% -4,9% 11,0% 5,0% 0,74 7,12% 0,66 0
Event Driven (Sub-Group) 1,0% -15,9% -0,1% 9,2% 0,98 18,91% 1,66 -1
Distressed Securities -0,7% -20,9% -5,0% 10,1% 0,90 28,23% 2,50 -2
Merger Arbitrage 2,4% -1,8% 14,0% 6,4% 0,81 2,55% 0,33 2
Special Situations 0,8% -16,9% -1,1% 9,6% 0,99 20,41% 1,80 -1
Arbitrage (Sub-Group) 0,7% -13,4% 2,4% 9,8% 0,90 16,52% 1,80 1
Convertible Arbitrage -1,8% -38,0% -22,2% 24,0% 0,83 64,91% 7,65 0
Fixed Income Arbitrage 0,9% -12,5% 3,3% 9,5% 0,84 14,73% 1,63 3
Other Arbitrage -0,1% -6,8% 9,1% 6,4% 0,90 9,38% 1,75 1
Statistical Arbitrage 0,1% 0,0% 15,8% 4,8% 0,83 3,82% 0,46 0
Long/Short Equity Group 1,1% -21,9% -6,0% 12,5% 0,99 27,99% 2,19 -1
Growth 1,1% -28,5% -12,6% 15,9% 0,98 39,82% 3,13 -2
Opportunistic 0,9% -15,9% 0,0% 11,0% 0,96 20,15% 1,44 1
Short Selling -0,7% 30,1% 45,9% 14,9% -0,68 17,94% Perf.negative 2
Value 1,2% -23,1% -7,2% 13,1% 0,97 30,01% 2,18 0
Directional Trading Group 1,9% 9,6% 25,4% 6,8% 0,33 0,00% 0,00 1
Futures 2,0% 20,2% 36,1% 9,7% 0,00 0,00% 0,00 0
Macro 1,3% -4,6% 11,3% 6,3% 0,93 7,60% 1,08 2
Market Timing 1,6% -4,7% 11,1% 7,6% 0,74 6,14% 0,61 0
Specialty Strategies Group 0,2% -26,0% -10,1% 13,3% 0,99 35,07% 4,07 -1
Emerging Markets 0,1% -36,1% -20,3% 18,2% 0,97 56,54% 6,39 0
Fixed Income (incl. ABL) -0,3% -11,9% 4,0% 6,7% 0,84 17,00% 2,55 2
Multi-Strategy 0,6% -12,0% 3,9% 8,5% 0,98 15,28% 1,36 -1
Global Bond Index 3,7% 5,3% 21,2% 6,1% 0,38 0,00% 0,00 1
MSCI World 1,1% -43,5% -27,6% 24,9% 0,88 87,26% 22,51 -1
CRB Index -5,2% -36,8% -20,9% 36,7% 0,76 103,99% Perf.negative -1
A lot of “red” for Correlation to the global Six strategies need to produce more than 30%
hedge fund index. returns before expecting to charge
The Short Selling strategy is by its nature performance fees again.
always negatively correlated to the global Two strategies (Convertible Arbitrage,
hedge fund index. Only one strategy group, Emerging markets) need to produce more than
Directional Trading Group, has shown a low 50% returns before expecting to charge
correlation to the global hedge fund index. performance fees again.
Chances to survive for the groups specialized in
Distance to HWM: these two strategies are poor. Expect closures,
Three strategies out of 18, Merger Arbitrage, restructuring, and start of new funds.
Statistical Arbitrage and Futures are near their
high.
BENCHMARK Weight: Weighting of each strategy within the "Greenwich Global Hedge Fund Index"
STRADIVARI Rating: over- and underweighting recommendation compared to BM-Weight
+++ Strong Overweight o Neutral - - - Strong Underweight
STRADIVARI Weighting: allocation recommended by STRADIVARI
Distressed Securities
Merger Arbitrage
Special Situations
Convertible Arbitrage
Other Arbitrage
Statistical Arbitrage
Growth
Opportunistic
Short Selling
Value
Futures
Macro
Market Timing
Emerging Markets
Multi-Strategy
BENCHMARK Weight STRADIVARI Weighting
Arbitrage (Sub-Group)
Selected Charts
Medium term down trend that started in 2003 Long term down trend that started in 1998
has been broken in may 2008 (see arrow) ended in august 2008, directly followed by a
reinforced by a bullish divergence pattern. sharp rebound that broke the low of 2000.
Very good risk reward trade: stop @ There is still plenty of room to go
preceeding low, target @ high in 2003.
Greenwich Short Selling: relative performance to Global Macro: relative performance to Global
Greenwich Global Hedge Fund Index Hedge Fund Index
Fixed Income: relative performance to Global Directional Trading Group: correlation to Global
Hedge Fund Index Hedge Fund Index
Long term double bottom supported by a The Directional Trading Group, especially the
bullish divergence pattern and a break of the Managed Futures sector, is the only segment
medium term down trend that started in 2003. with an intact upward trend, since 1995.
Target @ high in 2003. Noteworthy, that the correlation to the Global
Hedge Fund Index is declining since the
Directional Trading Group: absolute beginning of the crisis and the correlation to
performance since inception the MSCI World is for more than a year nearly 0
or negative.