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Alternative Market Briefing

Positive news for hedge funds says Lyxor research

Tuesday, January 22, 2013

Beverly Chandler, Opalesque London: Lyxor Asset Management’s latest research reveals that they have two key calls for 2013:

  • Risky assets outperform safe heavens
  • Hedge funds offer inviting risk-return profiles
The roots of their optimism can be traced to the realization of three scenarios, they write. "First, we expect a pickup of world activity, starting 1Q13, led by US and Asia. Second, we anticipate calming of political risks, following the recent non - US fiscal cliff - event, and the ongoing success of OMT measures in the euro-zone. Lastly, we believe that Central Banks should maintain ultra-loose monetary policies, as employment troubles take time to heal.

The firm argues that it’s time to prefer equities. "Equities remain historically cheap relative to safe haven bonds. Last year already saw the onset of normalization in equity risk premiums. We believe that risk premiums will ease again in 2013, as improving economic conditions prompt investors to become less and less reluctant to buy "risky" equities rather than "safe" government bonds".

In particular, Lyxor believes that European equities are well positioned. "Indeed, debt fears in peripheral countries sent domestic valuation metrics on ugly levels compared to their counterparts. European equities have room to significantly outperform U.S. equities in 2013. Moreover, the recent relaxation of Basel III rules should be a positive trigger for Eu......................

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