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Alternative Market Briefing

In 2016 outperforming hedge fund strategies suffered outflows while money went to underperforming CTAs

Wednesday, January 18, 2017

Komfie Manalo, Opalesque:

Hedge funds have experienced a quiet start to the year. The Lyxor Hedge Fund Index is flat year to date, and the trends observed in Q4 of last year continue to prevail in early 2017. Event driven were leading the hedge fund strategies last week with the Lyxor Event Driven Index up 0.3% as of Jan. 10 (+1.9% YTD) and global macro has outperformed since the beginning of January and gained 1.2% YTD.

Both special situations and merger arbitrage funds delivered healthy returns. Meanwhile, CTAs continue to lag behind. They have been negatively impacted by the pullback of the U.S. dollar and the reversal of energy prices.

CTAs posted losses (-3.7% YTD) as the reflation trade lost momentum. The release of the Federal reserve's minutes and the reaction to Trump's press conference reversed the upward trend of the dollar and U.S. bond yields, which proved costly for their USD longs and U.S. bond shorts. In the same vein, the sizeable allocation on USD vs. EUR and JPY hurt global macro funds.

Long/short equity experienced disparate results within styles and regions: variable bias funds outperformed their neutral and long bias peers.

Philippe Ferreira, Senior Strategist at Lyxor Asset Management, commented, "Ahead of the U.S earnings season, markets have taken a breather. This is in stark contrast with the beginning of 2016, when U.S. equities experienced their worst start to a year on record. The quiet start to the year saw a pullback ......................

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