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Alternative Market Briefing

Hedge funds gain ahead of FOMC meeting

Tuesday, September 15, 2015

Komfie Manalo, Opalesque Asia:

Hedge funds move higher with the Lyxor Hedge Fund Index posting a positive return of 0.6% as of end Sept. 8 (YTD 0.3%) as equity markets recovered following the August sell off, Lyxor Asset Management said. The best contribution comes from the CTAs with a positive return of 1.4%, reducing the losses over the year.

Event driven managers keep on recovering, up 0.9% last week and 1.6% month to date, bolstered by the improved risk sentiment, Lyxor said in its Weekly Briefing. Long/short equity managers also posted positive gains across the board and remain strong performers over the year.

Philippe Ferreira, senior cross asset strategist at Lyxor AM, said, "On 16-17 September the Fed will meet to decide whether or not to hike rates for the first time since 2006. The set of economic projections will reveal critical information about the Fed thinking. The market expects a dovish stance. The probability of a rate hike, based on Fed fund futures, is as low as 28%. The probability is close to 40% for the end-October meeting and reaches 59% for December."

He added, "September is thus not priced in and would disturb markets if it takes place. From our perspective, this would drag equities lower and trigger a bear flattening of the yield curve. We believe the Fed will refrain from hikin......................

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