Despite the trade war truce between the U.S. and China, equities struggled under concerns of slowing global growth and the risk of a Fed policy mistake. Foreign equities fared better than domestic equities, but all segments were materially negative. Long/ short equity was the weakest strategy, but did perform as expected by only capturing a portion of the downside in equities. Energy was the poorest performing sector for a second consecutive month. Oil was down an additional 11% while natural gas declined 36%.
Within event driven strategies, merger arbitrage was the top performing segment. A few deals that were in the final stages of closing were largely unchanged, offsetting negative performance in other deals resulting from the broader equity market decline. In general, cash for stock deals held firm while stock for stock deals saw declines.
For a second straight month relative value strategies struggled with widening credit spreads. High yield spreads widened by more than 100 basis points. This was partially offset by a material decline in interest rates, with most parts of the U.S. treasury curve seeing yields decline by more than 30 basis points.
Macro strategies were the top performers, with both systematic and discretionary posting positive returns. Systematic macro managers previously reduced equity exposure, with some going short. Those with a short exposure benefitted from the decline in equities. Long exposure to interest rates was also beneficial, given the flight to quality that accompanied the equity market sell-off. Short exposure to industrial metals contributed as well, as the metals declined due to concerns of slowing glob