Opalesque Industry Update - The Lyxor Global Hedge Fund index, an investable index based on Lyxor’s hedge fund platform which tracks the overall hedge fund universe, was up 1.3% in January. |
Most risk assets persistently gained value during January 2012, with a short breather at the end of the month. The macroeconomic data in the United States generally printed positively, and the same positive tone even showed up in Europe (at least relative to expectations). Markets let go of some of the fears they had harboured regarding a disorderly shakeup in the euro region, and the euro strengthened sharply (above $1.32) during the last half of the month. The Federal Reserve did their part for risk assets by revealing that they expected policy rates to remain exceptionally low for longer than previously admitted. Hedge funds benefited sharply from the improved trading environment, and many raised exposure to take advantage while it lasts.
The Lyxor Long-Term CTA Index gained 0.4% on the month. CTAs were generally long the US dollar and equities, which worked out nicely for the first part of the month, but the long bond positions were costly in mid-month when yields rose as the Greek debt talks dragged on. Funds rebounded toward month-end as yields eased. The Lyxor Short-Term CTA Index declined 0.9%.
The Lyxor L/S Credit Index had a strong month, gaining 2.1%. Credit spreads declined noticeably, providing a strong tailwind for managers. The Lyxor Convertible & Volatility Arbitrage Index posted a 2.2% increase, with the funds focused on the high yield space gaining the most.
Event Driven managers were given a dramatic boost by both the enhanced appetite for risk assets and by positive idiosyncratic events. The Special Situations Index gained 3.6% due to gains on specific events (e.g., activist positions) and on the 11% rise in the price of gold over the month. The Merger Arbitrage Index gained 1.1% as several key deals closed. The Lyxor Distressed index gained 1.4% as post-reorganization equity did well.
The Lyxor Fixed Income Arbitrage Index posted a solid 2.6% gain on the month. The Lyxor Global Macro Index gained 1.3% as long positions in gold, equities, and the Japanese yen did well. Some funds in both categories gained significantly on long positions in the emerging market currencies that rallied hard (e.g., Mexican peso and Korean won).
Equity-oriented hedge fund managers increased net exposures in January as the correlations among stocks eased and markets rallied. The Lyxor L/S Equity Long Bias Index posted a +3.0% gain, and the Lyxor L/S Equity Variable Bias Index rose +1.2% (the biggest gain since April 2011). The Market Neutral Index declined 0.4% and the Statistical Arbitrage Index gained 0.2%.