Equity Market Neutral funds take long and short positions in such a way that the impact of the overall market is minimized. Market neutral can imply dollar neutral, beta neutral or both.

• A dollar neutral strategy has zero net investment (i.e., equal dollar amounts in long and short positions).

• A beta neutral strategy targets a zero total portfolio beta (i.e., the beta of the long side equals the beta of the short side).

While dollar neutrality has the virtue of simplicity, beta neutrality better defines a strategy that is uncorrelated with the market return. Many practitioners of market-neutral long/short equity trading balance their longs and shorts in the same sector or industry. By being sector neutral, they avoid the risk of market swings affecting some industries or sectors differently than others.

Equity Market Neutral is a Relative Value strategy. Hence Equity Market Neutral funds may be used as “Risk Reducers” in portfolios.

Monthly returns201620172018
January-0.34%0.58%1.06%
February-0.86%0.09%-0.76%
March0.95%0.58%0.22%
April-0.60%0.32%0.03%
May0.58%-0.71%0.33%
June-0.37%0.22%-0.45%
July0.80%0.78%-0.10%
August-0.19%0.58%0.04%
September0.40%0.45%-0.16%
October0.24%0.72%n.a.
November0.13%0.23%n.a.
December0.33%0.52%n.a.
Annual1.06%4.43%0.20%
S&P 50011.96%21.83%10.56%
Lehman Treasury1.04%2.31%-1.67%
Quarterly returns201620172018
1st Quarter-0.26%1.25%0.51%
2nd Quarter-0.39%-0.18%-0.09%
3rd Quarter1.01%1.82%-0.22%
4th Quarter0.70%1.48%n.a.
Annual1.06%4.43%0.20%
S&P 50011.96%21.83%10.56%
Lehman Treasury1.04%2.31%-1.67%
Risk ProfileEdhec Equity Market Neutral IndexS&P 500Lehman Treasury
Monthly Std Dev Ann'd2.59%14.20%4.43%
Sharpe Ratio0.010.260.01
Information ratio-0.28n.a.n.a.
Min. Monthly Return-5.87%-16.80%-4.39%
Max. Monthly Return1.68%10.93%5.31%
Mean Monthly Return0.33%0.62%0.33%
Median Monthly Return0.42%1.08%0.40%
Exc. Kurtosis22.501.471.52
Skewness-3.27-0.690.03
% of winning Months78.87%66.20%58.69%
Average Winning Return0.59%2.86%1.13%
% of losing Months21.13%33.80%41.31%
Average Losing Return-0.64%-3.75%-0.81%
Correlation AnalysisEdhec Equity Market Neutral IndexS&P 500Lehman Treasury
S&P 5000.391.00-0.35
S&P 500 Value0.380.97-0.35
S&P 500 Growth0.380.97-0.33
S&P Mid Cap0.460.92-0.34
S&P Small Cap0.420.86-0.35
Lehman Treasury-0.30-0.351.00
Baa-Aaa-0.23-0.080.06
Chg in Baa - Aaa-0.29-0.120.17
10 years - 3 Months-0.14-0.060.12
Chg in 10 years - 3 Months-0.03-0.03-0.04
VIX-0.38-0.440.27
Chg in VIX-0.29-0.660.20
in %CSFBHennesseeHFRHF NetBarclayCISDMGreenwich
2006 Q26.0%13.6%16.7%16.5%16.7%15.0%15.5%
2006 Q35.9%13.1%17.0%16.8%16.7%14.9%15.6%
2006 Q46.2%12.6%16.9%16.8%16.4%15.7%15.5%
2007 Q16.6%12.4%17.0%16.7%16.3%16.0%15.0%
2007 Q27.2%12.5%16.9%16.6%16.5%15.4%15.0%
2007 Q35.0%10.9%17.7%17.5%17.3%15.3%16.2%
2007 Q410.9%9.6%16.5%16.5%16.5%14.5%15.5%
2008 Q111.7%10.7%15.6%16.1%15.9%14.9%15.1%
2008 Q210.3%12.9%15.4%15.8%15.6%14.9%15.1%
2008 Q310.4%12.3%15.8%16.3%15.9%14.2%15.2%
2008 Q412.7%13.0%15.1%15.3%15.0%14.2%14.7%
2009 Q12.6%14.6%15.5%17.3%16.9%16.1%17.0%
2009 Q22.6%14.8%15.5%17.3%16.8%15.8%17.2%
2009 Q32.8%15.1%15.8%17.3%16.5%15.5%17.1%
2009 Q43.0%14.9%15.9%17.3%16.4%15.5%17.0%
2010 Q12.8%15.0%15.9%17.3%16.4%15.5%17.1%
2010 Q22.6%15.1%16.0%17.3%16.4%15.5%17.2%
2010 Q32.4%15.2%16.0%17.4%16.4%15.4%17.2%
2010 Q43.0%15.0%16.0%17.2%16.3%15.3%17.2%
2011 Q13.0%14.7%16.2%17.2%16.3%15.3%17.3%
2011 Q23.7%14.4%16.3%17.2%16.2%15.1%17.2%
2011 Q33.5%15.2%15.9%16.8%15.9%15.6%17.1%
2011 Q45.2%14.9%15.7%16.6%14.5%15.7%17.4%
2012 Q112.4%13.2%15.8%15.4%13.4%14.5%15.2%
2012 Q212.6%13.0%15.6%15.3%13.6%14.6%15.3%
2012 Q312.7%12.5%15.2%15.2%14.8%14.4%15.1%
2012 Q412.6%12.7%15.1%15.1%15.1%14.3%15.2%
2013 Q112.8%12.9%15.0%15.0%15.0%14.2%15.1%
2013 Q212.9%12.9%15.1%15.0%14.8%14.2%15.1%
2013 Q312.8%12.6%15.1%14.9%14.8%14.3%15.3%
2013 Q412.5%13.0%15.0%15.1%14.8%14.5%15.0%
2014 Q113.2%12.9%14.9%14.9%14.8%14.4%14.9%
2014 Q213.1%12.9%14.7%15.1%14.9%14.5%14.8%
2014 Q313.0%12.5%14.8%15.2%15.2%14.4%14.9%
2014 Q416.3%n.a.17.6%18.2%17.9%11.9%18.0%
2015 Q116.4%n.a.18.1%19.1%18.7%9.2%18.6%
2015 Q215.1%n.a.18.5%19.6%19.0%9.4%18.4%
2015 Q313.2%n.a.20.0%18.8%19.2%9.6%19.3%
2015 Q413.4%n.a.20.3%18.4%19.7%9.4%18.8%
2016 Q112.3%n.a.20.5%18.4%19.8%9.7%19.2%
2016 Q212.8%n.a.18.7%18.3%18.4%13.0%18.7%
2016 Q313.5%n.a.18.4%18.0%18.6%13.9%17.6%
2016 Q412.1%n.a.18.6%18.0%18.7%14.1%18.6%
2017 Q19.3%n.a.19.1%18.1%19.2%15.5%18.7%
2017 Q29.6%n.a.19.1%18.0%19.6%14.9%18.9%
2017 Q38.7%n.a.19.7%17.8%19.7%15.8%18.3%
2017 Q48.7%n.a.19.1%17.8%19.0%17.8%17.7%
2018 Q17.5%n.a.19.4%17.7%19.2%18.1%18.1%
2018 Q211.8%n.a.18.6%16.3%17.9%18.4%17.0%
2018 Q313.5%n.a.21.8%21.1%21.9%21.7%n.a.
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