17 Jan 2011
MAN ON THE MONTH: REVIEW OF DECEMBER AND OUTLOOK
Optimism over the outlook for 2011 led global equities higher in December amid a fall in volatility and reduced trading volumes due to the Christmas holidays. Markets benefited from a surge in risk appetite as a number of economic data releases proved surprisingly resilient. As a result, the MSCI World Index (price return) rallied 5.6% in December as investor’s shrugged off worries over European sovereign debt and further monetary tightening fears in China.
The increase in risk appetite weighed on the US dollar over the month as investors resumed their search for higher-yielding assets. A number of commodities also posted double-digit gains as the increased demand for ‘risk’, supply/demand issues and a weakened US dollar boosted prices.
Additional findings from Man Multi-Manager’s monthly analysis for December included:
- In the Equity Hedged style, European and US focused managers led returns, particularly those concentrated in the trading oriented mid-cap space. Asia-Pacific and Emerging Market managers ended with modest gains, with those who were net-long driving returns. On a regional basis, Korea and Taiwan exposure proved profitable while positions in Hong Kong and India proved challenging
- Relative Value was boosted by strong credit markets in December, with credit arbitrage proving the strongest sub-style over the month. For relative value, credit arbitrageurs drove gains while for event driven, multi-strategy and distressed managers led returns. Additional small gains were added by the convertible bond arbitrage sub-style on the back of a solid rally in underlying convertible markets.
- The Event Driven style secured its fourth consecutive gain in December as rallying equity and credit markets provided a tailwind to performance. Distressed managers ended the year in positive territory due to increased demand for risk assets.
Optimism over the outlook for 2011 led global equities higher in December amid a fall in volatility and reduced trading volumes due to the Christmas holidays. Markets benefited from a surge in risk appetite as a number of economic data releases proved surprisingly resilient. As a result, the MSCI World Index (price return) rallied 5.6% in December as investor’s shrugged off worries over European sovereign debt and further monetary tightening fears in China.
The increase in risk appetite weighed on the US dollar over the month as investors resumed their search for higher-yielding assets. A number of commodities also posted double-digit gains as the increased demand for ‘risk’, supply/demand issues and a weakened US dollar boosted prices.
Michelle McCloskey, Head of Research for Man’s Multi Manager business, commented: “December’s market conditions benefitted a variety of hedge fund styles with managed futures managers ending the month up over 7%, the style’s strongest monthly return of the year. Global macro also proved strongly positive as ‘risk on’ trades such as long equities and commodities profited from improved market sentiment.
“Further positive performance was accrued by equity hedged as a net-long bias benefited from the strong underlying rally in global equity markets. Elsewhere, relative value and event driven managers also gained as credit indices pushed higher.”
Additional findings from Man Multi-Manager’s monthly analysis for December included:
- In the Equity Hedged style, European and US focused managers led returns, particularly those concentrated in the trading oriented mid-cap space. Asia-Pacific and Emerging Market managers ended with modest gains, with those who were net-long driving returns. On a regional basis, Korea and Taiwan exposure proved profitable while positions in Hong Kong and India proved challenging
- Relative Value was boosted by strong credit markets in December, with credit arbitrage proving the strongest sub-style over the month. For relative value, credit arbitrageurs drove gains while for event driven, multi-strategy and distressed managers led returns. Additional small gains were added by the convertible bond arbitrage sub-style on the back of a solid rally in underlying convertible markets.
- The Event Driven style secured its fourth consecutive gain in December as rallying equity and credit markets provided a tailwind to performance. Distressed managers ended the year in positive territory due to increased demand for risk assets.
Michelle McCloskey added: “In light of the continued uncertainty over European sovereign debt, we are excited about Credit Long/Short opportunities going into Q1 2011. Our decision to overweight allocation to Credit Long/Short managers remains intact as the prospect of continued volatile credit spreads present favourable opportunities on both the up and downside. We continue to favour nimble, fast moving managers given the continued market uncertainty and possible roadblocks to recovery."
