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Macroeconomic data were reasonably supportive in April, but the key positive driver for stock prices was probably earnings season. Markets were relatively quiet during the first part of the month, with prices fairly stable. There was a slight hiccup mid-month, as the US’s credit outlook was revised to negative and investors once again worried about European sovereign debt issues. Solid trends asserted themselves, however, when investors focused on earnings for the last two weeks of the month.

Trend following CTAs, as represented by the Lyxor Long-Term CTA Index, posted the highest strategy return in April 2011 and the index’s highest return since August of last year. CTAs had generally been long risky assets and short bonds in March, and they suffered for that when investors fled to quality mid-month. Managers subsequently trimmed positions, with the result that the April rally in bonds did not hurt that much, yet the gains in equities, precious metals, FX, and some commodities all contributed positively to the bottom line. Short-Term CTAs also fared well, with the Lyxor index gaining 1.9% on the month.

The Lyxor Global Macro Index gained 1.8%. Managers with tilts toward long bonds and short US dollar had significant tailwinds.

Equity managers had good raw materials this month. The L/S Equity Long Bias Index gained 1.4% and the Variable Bias Index gained 1.5%. Managers with a commodity stock bias and/or emerging market bias were able to post higher numbers. The Market Neutral Index (-0.2%) and Statistical Arbitrage Index (+0.6%) each exhibited dispersion among the returns of constituent managers. The more fundamentally-oriented market neutral managers generally did a bit worse than some of the more quantitatively oriented managers, but there were exceptions as always.

The Lyxor L/S Credit Index gained 1.0%. Credit spreads fell sharply during the last week of the month, with Investment Grade and High Yield spreads reversing about half of the increases that began in late February. The Lyxor Convertible and Volatility Arbitrage Index declined 0.5%, partially due to a cheapening of bonds relative to theoretical values.

The Fixed Income Arbitrage Index gained 0.6%, with managers in the mortgage-backed space performing significantly better than average.

Event-Driven managers had a decent month, with the Special Situations Index gaining 0.6% and the Merger Arbitrage Index gaining 1.1% on a very favorable environment for M&A transactions. The Distressed Index posted an increase of 0.7% due to idiosyncratic events in the post-reorganization equity space.

(press release)