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Komfie Manalo, Opalesque Asia: Hedge funds rebounded as market conditions improved at the turn of the month, said Lyxor Asset Management. The Lyxor Hedge Fund Index was up 0.4% last week, following a 3.3% drawdown in August.
Lyxor said in its Weekly Briefing that year to date, hedge funds have demonstrated their ability to protect portfolios, returning - 0.3% whilst the MSCI World and JPM Global Aggregate Bond Index were down 7% and 2.3% respectively. On a risk-adjusted basis, the outperformance of hedge funds is impressive and marks a critical change of paradigm.
Philippe Ferreira, senior cross asset strategist at Lyxor AM, said, "Fears of competitive devaluations in emerging markets and unease about the timing and amplitude of the Fed’s tightening cycle has recently caused markets to move in a way not seen for years. In the short term, we expect that market conditions will improve due to a combination of supportive fundamentals in developed markets and the Chinese not engaging in a beggar-thy-neighbor policy. However, renewed bouts of volatility are likely to haunt investors regularly in the medium term due to uncertainties over interest rates. In this environment, hedge funds are likely to outperform traditional asset classes, a topic we have discussed in previous publications."
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