Relative value investment strategies have produced strong returns since the end of December 2008, when the movements of various asset classes became more correlated with key indicators PARA_BREAK_SENTINEL_9f8e7d6c Relative value investment strategies have produced strong returns since the end of December 2008, when the movements of various asset classes became more correlated with key indicators such as corporate earnings and corporate credit spreads, according to Mellon Capital Management. "This trend has become very strong since December," says Eric Goodbar, managing director and hedge fund strategist, Mellon Capital Management. "Before December, the behavior of these asset classes was driven by extreme fear in the marketplace. While the return to fundamentals has benefited relative value strategies, strategies focused on momentum have generally not benefited from this trend. We have seen substantial divergence as relative value funds have significantly outperformed other quantitative trend-based classes such as commodity trading advisers." Relative value investors are willing to bear some level of risk for an appropriate reward. They typically base their decisions on the expected returns from stocks, bonds and currencies and often invest in these asset classes throughout the world. CTAs are more likely to add value when prices move without regard to fundamental data. This often happens when stress events hit the markets and investors shed risk taking exposures - pushing aside the knowledge about expected returns from stocks, bonds and currencies. From 31 December 31 through 31 May 2009, the HFRI Relative Value (Total) Index, which measures the performance of relative value funds, has returned positive 11.79 per cent versus negative 0.95 per cent for the Barclay CTA Index, which measures the performance of CTA funds, and positive 2.96 percent for the performance of US equities as measured by the Standard & Poor's 500 Index.
Exploiting the volatility premium through systematic strategies
With over $2bn in AUM just two years after launch, Empureon is leveraging volatility premiums, portfolio hedging and portable alpha to…
More
Alternative Views Ahmet Peker and Daniel Lucke
In Alternative Views Hedgeweek®,goes behind closed doors with those in the know to get the latest on hedge funds. Today, we speak to Ahmet…
More
Removing human bias from an concentrated market
Mast Investments outline how systematic investment processes seek to reduce behavioural biases while identifying opportunities created by…
More