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Alternative Market Briefing

Market rebound helps hedge funds to bounce back

Tuesday, April 17, 2018

Komfie Manalo, Opalesque Asia:

The market rebound supported the hedge fund industry last week, Lyxor Asset Management said in its Weekly Report. CTAs strongly recovered thanks to the rise in oil prices and U.S. Treasury bond yields, said Lyxor AM senior strategist Philippe Ferreira.

"Overall, models remained moderately exposed to major asset classes amid depressed trend-following conditions. They now hold neutral exposures to equities," he added.

CTAs are back as a diversification strategy

Lyxor said that L/S market neutral funds delivered also healthy returns last week as momentum stocks recovered. The outperformance of growth vs. value stocks helped the strategy outperform year-to-date. Directional strategies such as special situations are also up month-to-date, while merger arbitrage funds were resilient despite the widening of deal spreads.

Recent market developments saw an easing of market tensions as the markets head into the U.S. earnings season. Yet, geopolitical concerns remain and trade wars have legs, in Lyxor's view. The overall backdrop is tactically supportive for risk assets after the recent 6% drawdown of the MSCI World since the peak on January 26th.

Ferreira said, "Our risk appetite remains limited from a strategic standpoint. The 3-month correlation between equities and bond returns remains in positive territory, limiting portfolio diversification options. In the hedge fund space,......................

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