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Alternative Market Briefing

Exposures on risk assets, credit positions hurt hedge funds

Tuesday, December 16, 2014

Komfie Manalo, Opalesque Asia:

Hedge fund strategies were hurt last week by their long exposures on risk assets, especially credit positions. High yield has been negatively impacted by the deterioration in risk sentiment and by oil prices, in part related to the weighting of energy debt in the U.S., said Lyxor Asset Management in its Weekly Brief.

Philippe Ferreira, Lyxor AM’s head of research, managed account platform, said that while these strategies proved to be resilient since the start of the year, L/S Credit and CB Arbitrage funds were hurt by the widening in spreads. Event driven funds were also hurt on their long credit exposure, with distressed funds underperforming the space. Greece had a very limited impact, as managers have low exposures on Greek positions - both on bonds and equities.

Ferreira said, "Ahead of the FOMC meeting on 16-17 December, market tensions rose a notch. Medias reported last week that the Fed is considering shifting the tone on low rates, dropping an assurance that short-term rates will stay near zero for a 'considerable time.’ On top of this Greece’s PM Sanaras called a snap presidential election, with the first round about to take place as early as December 17th. Such events have rattled markets on both sides of the Atlantic. Equities went down, particularly in Europe, whilst the US yield curve flattened and emerging currencies depreciated against the USD."

Last week was also cha......................

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