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Alternative Market Briefing

Benefits of actively managed portfolios to remain important as the bull market narrows, says Lyxor Research

Friday, May 04, 2012

Bailey McCann, Opalesque New York: During the first quarter, risky assets’ bounce off last October lows has been remarkable, according to new research from Lyxor Asset Management. The firm cites the European debt deal and a stronger US economy as catalysts for increasing investor confidence. Taken together, all of these factors speak to a broader need for actively managed portfolios the firm writes in the report.

Going forward, the firm believes three major drivers will likely push markets higher: plentiful liquidity, increased scarcity in risky assets and very attractive risk premiums that should drive a reversal in flows. Many hedge funds have been able to benefit from the improved market tone. A key corollary of the rally has been the low volatility, low correlation environment.

"This wide divergence across managers and strategies again illustrates that active management of hedge fund portfolios has the potential to add significant value" says Jean-Marc Stenger, Deputy Head of Alternative Investments at Lyxor Asset Management in the report.

In the future, passively managed portfolios may see a decline in performance, as passive portfolios are less reactive to market changes. For examples, report data shows that Portugal may be the next in line for a haircut, portfolios that are not well positioned to react to this news if it happens are likely to face some headwinds. In terms of strategies, the firm is slightly underweight CTAs while being slightly ov......................

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