Hedge Fund Performance (Nov/2011) & Maximum Drawdown

Here are the latest performance numbers for the Dow Jones Credit Suisse Hedge Fund Indices: November was a tough month for all trading styles. The top performer (Fixed Income Arb) returned half a percent. On the other hand, given the turmoil in the markets due to uncertainty in the EU, the worst performer (Emerging Markets) was only down 2.7%. The top performer in 2011 has been Global Macro (up 6% for the year, and flat in November):

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Global Macro also leads the way over the most recent 24-month period:

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MAXIMUM DRAWDOWN

This month I put together charts to highlight the Maximum Drawdown, at least for the period covered by my data. Recall that drawdown measures the percentage decline from a peak to a trough. What I did was calculate the maximum such decline and highlight the month when it occurred.

Here is the graph for Equity Market Neutral, Dedicated Short Bias, and the S&P 500. For visual purposes I normalized the time-series so all three had a common starting value. All three series suffered their Maximum Drawdowns in Feb/2009. The most dramatic graph is the line for Equity Market Neutral: after a steady, non-volatile upward trend, the index fell of the cliff in late 2008 and bottomed out on Feb/2009! What a scary ride for investors:

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Here are the equivalent graphs for Global Macro and Managed Futures: much less dramatic than the Equity Market Neutral chart. Note that over the time period covered (1994 - Nov/2011), the Global Macro index blows away Managed Futures.

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Finally here is the equivalent chart for Fixed-income, Convertible, and Risk Arbitrage. All three produced steady gains until plunging at the end of 2008. They have since recovered and surpassed their peaks in 2007/2008 (especially the Convertible Arb index).

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Related post:

Quantifying Losses with Maximum Drawdowns

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