Goldman Sachs Dynamic Opportunities Limited (USD Feeder)
Performance Highlight January 2012
Overview
Risk assets climbed steadily higher during the first few weeks of January, as near-term European debt concerns were assuaged by a well-subscribed ECB long-term refinancing operation. U.S. economic data continued to show signs of improvement, thereby suggesting that the economic recovery was more resilient to headwinds elsewhere in the world. An additional tailwind came in late January when the Federal Reserve announced its intention to keep interest rates at current levels until late 2014. Correlations declined during the month, both within equities and across asset classes, but remain at elevated levels compared to historical averages.
Most global equity markets rose in January, with the strongest performance seen in cyclically sensitive sectors and geographies. The MSCI Emerging Markets Index gained 11.2%, outpacing developed market equities as the S∓P 500 Index rose 4.4%. The U.S. dollar sold off broadly against its key trading partners, with emerging market currencies outperforming as the Brazilian real, Indian rupee, and Mexican peso each appreciated by roughly 7%. The S∓P GSCI edged 2.4%higher, with gains driven primarily by precious and industrial metals while energies and grains finished close to flat. Fixed income markets were range-bound but traded with a steepening bias during the month, as the U.S. 10-year yield fell 8 bps to 1.80% and the U.S. 30-year yield rose 4 bps to 2.94%.
Hedge funds produced strong performance in January, with gains experienced across most strategies as risk assets trended higher and correlations declined. Most managers entered the year positioned conservatively after maintaining low risk through much of the second half of 2011, but gradually increased exposure over the course of the month. Fundamental hedge funds rode risk assets higher and outperformed other strategies, particularly those managers with higher net exposure levels. Though long-term macro concerns still persisted, accommodative near-term policy and declining correlations led some managers to suggest that 2012 may provide a more robust opportunity set for hedge funds.
The Event Driven sector posted strong gains in January, with both credit and multi-strategy managers benefiting from the general rally in risk assets. Equity Long/Short strategies also produced strong returns, with high dispersion driven by differing net exposure and sector allocations. Performance was mixed across the Tactical Trading sector, with losses from managed futures funds offset by gains from macro managers, many of which had shifted their portfolios to benefit from the "risk on" moves. Most Relative Value managers realized positive performance as volatility declined and pricing relationships converged across asset classes.
http://www.rns-pdf.londonstockexchange.com/rns/8566Y_-2012-3-7.pdf
Sources: Bloomberg, Financial Times, Reuters, The New York Times, The Wall Street Journal.
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