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Bailey McCann, Opalesque New York: The market environment at the end of July fueled directional strategies in the Lyxor index, but broader market factors are likely to provide the biggest boost to CTAs going forward according to analysts in the Lyxor weekly research note.
"Going forward, there are signals that the market rebound is running out of steam. The recent fall in oil prices, on the back of renewed stock building in the US and higher OPEC output, is a signal of global growth concerns. As an illustrative example, the US economy grew at a disappointing 1.2% rate in Q2 (seasonally adjusted annual rate), well below the 2.5% real GDP growth rate expected. Growth figures for Q1-16 were also revised down, from 1.1% to 0.8%. As a result, our outlook for hedge fund strategies remains unchanged. We maintain an overall cautious stance which involves an overweight position on L/S Equity Market Neutral, Merger Arbitrage and CTAs. In that regard, we expect that the underperformance of CTAs in July will come to an end in the near term. Their aggregate short USD position, which was not rewarding in July, is likely to generate gains going forward as the Fed stance may remain dovish for longer," Lyxor said.
Hedge funds ended the month in positive territory, with the Lyxor Hedge Fund Index up 1.6% in July.
CTA funds ended the week of 7/25 posting modest positive returns of +0.2%. Systems benefited from their moderately long equity stance as markets extended the "risk-on...................... To view our full article Click here
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