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Alternative Market Briefing

Hedge funds come out of vicious cycle with high dispersion of returns

Tuesday, September 01, 2015

Komfie Manalo, Opalesque Asia:

The deflation and growth scares morphed into a vicious cycle last week, said Lyxor Asset Management. Multiple trading anomalies were observed, especially on Monday, suggesting that systematic and algorithmic trading amplified the sell-off.

Philippe Ferreira, senior cross asset strategist at Lyxor AM, said that the Lyxor Hedge Fund Index was down 3.5% as of end Aug. 28 (-0.8% YTD). He added in Lyxor AM’s Weekly Briefing that event driven funds were the main losers.

Ferreira added, "There was high dispersion in managers’ return, with losses in some heavy-weight funds. Overall, CTAs and fixed income arbitrage funds proved to be reasonably resilient. A milder pressure on credit supported credit strategies. The losses in the L/S equity space were reasonable, with the notable exception of Asian and U.S. long bias managers. A high dispersion was recorded among global macro funds."

Lyxor also observed that the bottoming process has already begun, but the sentiment remains febrile. On the one hand, the apparent disconnection of this sell-off with macro data is opening bargain opportunities. On the other hand investors are pondering whether a more fundamental change is being priced in, which would suggest a more bearish phase for risky assets.

Current concerns include: - The true ma......................

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