August 2012 Performance of the HFRX Daily Indices

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HFRX Indices August 2012 performance notes

Global equity markets posted gains for the 3rd consecutive month in August, with significant sector contributions from Energy and Telecom and geographic contributions from Italy and Spain; Asian equities experienced mixed performance. Trading volumes declined throughout the month, as implied volatility declined despite an early month spike associated with a trading loss at a large US executing broker dealer. US yields rose and the yield curve steepened as investors discounted optimism with regard to the resolution of the European sovereign debt crisis; the US dollar declined against the Euro and Pound, despite rising against the Japanese Yen. Oil, Gold and most precious metals posted gains while Agricultural Commodities posted declines on drought relief. Hedge funds posted the 2nd consecutive month of gains, with the HFRX Global Hedge Fund Index gaining +0.51% with contributions from Equity Hedge and Event Driven strategies; the HFRX Market Directional Index gained 0.82% for the month.

The HFRX Event Driven Index posted a gain of +0.92% in August, with contributions from Equity Special Situations, Activist and Credit Arbitrage strategies only partially offset weakness in Distressed exposure. The HFRX ED Special Situations Index had the strongest contribution to ED performance, gaining +1.21% on positive developments in transactions in the Consumer, Technology/Media and Energy sectors. The HFRX Merger Arbitrage Index posted a gain of +0.16% for the month with contributions from core positions in Hertz/Dollar Thrifty, Glencore/Xtrada, Glencore/Viterra and Duke Energy/Progress Energy. The HFRX Distressed Index declined -0.34% despite improving credit markets, with negative contributions from idiosyncratic positions in US and Emerging Markets.

The HFRX Equity Hedge Index posted a gain of +0.84% in August, with core contributions across both Value & Growth sub-strategies. The HFRX Fundamental Value Index gained +0.71%, with significant contributions from exposure to Energy, Telecom, Financials and European equities. The HFRX Fundamental Growth Index posted a gain of +0.52% with contributions from Asian, Technology and Renewable Energy areas. Gains in fundamental market neutral managers were offset by weakness in trading oriented strategies, with the HFRX Market Neutral Index posting a modest decline of -0.08% for the month.

The HFRX Relative Value Arbitrage Index posted a gain of +0.20% in August, with contributions from Convertible, Corporate Credit and MLP strategies as US yields rose and credit tightened. The HFRX Convertible Arbitrage Index gained +0.67% as spread tightening offset rising yields and falling volatility and with core contribution from Japanese exposure; YTD the Index has gained +5.89%. The HFRX MLP Index gained +1.77% on strong demand for transport and storage across Energy commodities as weather considerations raised production/supply concerns. The HFRX Fixed Income Credit also employed effective hedging to offset rising yields, posting a gain of +0.52%.

The HFRX Macro CTA Index posted a modest decline of -0.02% in August with positive contributions from Discretionary Commodity and Multi-strategy exposures offset by weakness in trend following CTA strategies. Discretionary Macro managers benefitted from tactical positioning in Commodities and short Fixed Income positioning, which were only partially offset by Currency exposures. Systematic Macro strategies also experienced weakness in Currency exposures, with declines in Agricultural Commodities also contributing to weakness; the HFRX Systematic Diversified CTA Index posted a decline of -1.54% for the month.

Comments reference performance figures for August 31, 2012


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Daily HFRX Indices - USD
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  Monthly Performance Historical Performance
  AUG ROR JULY ROR YTD INDEX VALUE
(AUGUST 31, 2012)
Last 12M Last 36M
(ann)
Last 48M
(ann)
Global
             
HFRX Global Hedge Fund Index 0.51% 0.54% 2.29% 1,134.81 -1.24% 0.80% -2.63%
HFRX Equal Weighted Strategies Index 0.36% 0.45% 1.81% 1,118.67 -1.23% 1.48% -2.41%
HFRX Absolute Return Index 0.27% -0.23% 0.16%   948.05 -0.61% -1.21% -4.84%
HFRX Market Directional Index 0.82% 1.78% 1.43% 1,036.39 -8.94% -0.69% -4.30%
Equity Hedge
HFRX Equity Hedge Index 0.84% 0.55% 2.60% 1,026.42 -3.21% -1.98% -5.22%
HFRX EH: Equity Market Neutral Index -0.08% -0.07% -5.11%   931.22 -7.59% -2.00% -3.16%
HFRX EH: Fundamental Growth Index 0.52% -0.09% 2.88% 1,449.76 -6.18% 0.77% -1.57%
HFRX EH: Fundamental Value Index 0.71% 1.38% 3.57%   956.99 -3.78% -3.53% -6.27%
Event Driven
HFRX Event Driven Index 0.92% 0.25% 4.20% 1,362.21 2.48% 1.70% -0.66%
HFRX ED: Distressed Restructuring Index -0.34% 0.45% 3.15%   973.38 -1.42% 2.60% -8.29%
HFRX ED: Merger Arbitrage Index 0.16% -0.20% 0.95% 1,507.87 -0.64% 2.39% 3.16%
HFRX ED: Special Situations Index 1.21% 0.08% 2.29% 1,096.74 0.59% 1.65% -1.55%
Macro
HFRX Macro/CTA Index -0.02% 1.48% -0.37% 1,161.73 -4.29% -3.09% -3.50%
HFRX Macro: Systematic Diversified CTA Index -1.54% 3.23% -3.05% 1,591.37 -3.80% 0.21% 1.75%
Relative Value
HFRX Relative Value Arbitrage Index 0.20% 0.03% 2.36% 1,154.90 0.25% 5.43% 0.52%
HFRX RV: Convertible Arbitrage Index 0.67% 1.16% 5.89%   693.69 3.41% 6.08% -7.53%
HFRX RV: Multi-Strategy Index 0.00% -0.54% 1.50% 1,796.78 1.45% 7.87% 8.17%
Emerging Markets
HFRX Emerging Markets Composite Index 0.54% 0.21% 5.55% 1,990.15 0.95% 7.35% 6.24%
Concept
HFRX Fixed Income - Credit Index 0.52% 0.64% 4.56% 1,818.76 2.21% 6.55% 7.25%
HFRX MLP Index 1.77% 5.33% 3.09% 1,520.61 11.64% 18.61% n/a

The August performance of the HFRX Monthly Indices will be published on September 17.


HFRX Indices are designed to be representative of the overall composition of the hedge fund industry.

Hedge Fund Research, Inc. ("HFR") utilizes a UCITS-compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Strategy Universe. Construction of each Index employs state-of-the-art quantitative techniques and qualitative analysis. Multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding hedge fund strategy.

The full "HFRX Hedge Fund Indices Defined Formulaic Methodology" may be downloaded here.

HFRX index performance profiles reflect respective dates of inception. Index values provided prior to the inception of daily performance, are calculated by means of retroactive and iterative application of the index model. The values for the HFRX EUR, JPY, CHF and GBP FX Indices are calculated by applying to the USD index value the cost of a rolling monthly foreign exchange contract on the relevant currency. All HFRX Indices are re-balanced quarterly. The names for several HFRX Indices were updated in October 2011 in order to better reflect how each index falls within the HFR Hedge Fund Strategy Classification system.


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