HFRX Daily Indices Mid-March 2014 Performance Update

Financial markets posted declines through mid-March, as geopolitical uncertainty associated with the Ukraine and the Crimean Peninsula increased, while weak economic data on Chinese growth also raised investor concerns. Global equity markets declined through mid-March, with declines across most regional and sector exposures led by Emerging Markets, with the Russian equity market falling over -16% through mid-March. Declines in European equities were led by declines in Germany, France, UK, Switzerland and the Netherlands, while Asian equity market declines were led by Hong Kong, Korea, Japan and China. US equities also posted declined through mid-March, with sector weakness led by Technology, Energy, Telecom and Healthcare, which were partially offset by sharp gain in Commodity sensitive equities. The Russian Ruble collapsed against the US dollar, falling to historical record lows; the US Dollar posted mixed performance against other currencies, rallying to an 4-week high against the British Pound Sterling while falling to a 28-month low against the Euro. The US Dollar also declined against the Indonesian Rupiah, Australian Dollar and New Zealand dollar. Global fixed income yields were narrowly unchanged through mid-month, with small declines across UK Gilts, German Bunds, France and Spain, with investment grade credit spreads widening as overall asset volatility increased sharply. Commodity prices were mixed through mid-month, with gains in Gold, Wheat, Coffee and Live Hogs offset by declines in Copper, Oil and Natural Gas. Hedge funds posted declines with the HFRX Global Hedge Fund Index declining -0.48% through mid-month, while the HFRX Absolute Return Index posted a narrow decline of -0.07%.

HFRX Equity Hedge Index posted a decline of -0.39% through mid-March with tactical short exposure mitigating volatility. HFRX Market Neutral Index declined -0.13%, with gains across fundamental, trading oriented strategies offset by declines in factor-based models, as volatility increased and dispersion widened. HFRX Fundamental Value Index declined -0.32% with positive contributions from exposures to Financials and Consumer sectors offset by declines in European small cap equities. HFRX Fundamental Growth Index posted a decline of -0.63% with positive contributions from Global Healthcare offset by declines in Emerging Asian exposure.

HFRX Event Driven Index posted a decline of -0.35% through mid-March, with positive contributions from Distressed/Restructuring managers offset by Equity Special Situations strategies. HFRX Distressed Index posted a gain of +0.14%with contributions from restructurings across Technology, Industrials and Consumer sectors in the US. HFRX Merger Arbitrage Index posted a modest gain of +0.04%, with mixed contributions from transactions in Suntory/Beam, Actavis/Forest Labs, CapitalSource/PacWest Bancorp, Sterling Financial/Umpqua Corp, Avago Technologies/LSI and Tower Financial/Old National Bancorp. HFRX Special Situations Index declined -0.53%, with contributions from core positioning in American Realty, Hertz, Time Warner, Sensient Technologies, Apple, Herbalife, eBay, Jos A. Bank, Ferro and American Airlines.

HFRX Macro Index posted a decline of -0.80% through mid-March as EM volatility increased, Russian equities fell sharply and the Rubble collapsed on uncertainty over Ukraine. HFRX Macro: Systematic Diversified Index and HFRX Emerging Markets Index declined -1.39% and -1.49%, respectively, from losses in equities and currencies; while discretionary fixed income exposure had a partially offsetting gain.

HFRX Relative Value Arbitrage Index posted a decline of -0.46% through mid-March with mixed contributions from Convertible Arbitrage offset by Multi-Strategy managers. HFRX Convertible Arbitrage Index declined -0.76% as gains in volatility positions were offset by exposure to Asian and Japanese convertibles. HFRX Fixed Income Credit Index posted a narrow decline of -0.18% while the HFRX MLP Index gained +1.76% through mid-month on continued demand for yield generating energy infrastructure partnerships.

Comments reference performance as published through March 17, 2014.

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