Thu, Oct 23, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Credit strategies dominate Lyxor hedge fund indices

Thursday, November 08, 2012

Stefan Keller
Opalesque Industry Update - Nine Lyxor Strategy Indices out of 14 ended the month in positive territory, led by the Lyxor Long/Short Credit Arbitrage Index (+1.7%), the Convertible Arbitrage Index (+0.5%), and the Distressed Index (+0.6%). The Lyxor Hedge Fund Index declined 0.6% in October (+1.6% in 2012 to date). Earnings season dominated news flow during the month of October. Earnings, as usual, generally beat expectations, but revenues and forward guidance disappointed investors. Fundamental news therefore drove most stock returns more than rumors about political deals did. Markets turned more pessimistic on growth mid-month and declined, but European equity markets managed to hold onto gains even as US markets ended in the red.

The dispersion among stocks and corporate bonds meant that hedge fund managers had the environment in which stock or credit selection skill was rewarded (i.e., alpha was possible). Beta management mattered greatly, though, as too much beta easily swamped alpha generation. Credit-oriented hedge funds continued to outshine funds in other strategies. The Lyxor L/S Credit Arbitrage Index gained 1.7% in October, yielding an 8.2% gain for 2012 thus far. The index has gained every month this year except for one (May). The active management of net exposure and the choice of short positions during a fundamentals-oriented month has been a major driver for Long/Short managers. A similar narrative played out for managers in the Lyxor Distressed Index (+0.6% this month and +6.3% year-to-date) and the Convertible Arbitrage Index (+0.5% this month and +3.6% year-to-date).

Stock selection mattered greatly for L/S Equity managers. Despite the down month for US equities, the Lyxor L/S Equity Long Bias Index gained 0.4% and the L/S Equity Market Neutral Index gained 0.7%. The L/S Equity Variable Bias Index declined 0.4% and the Statistical Arbitrage Index declined 1.5% as correlations rose toward month-end. Long positions in financials and in European equities were themes that paid off during the month.

The Merger Arbitrage Index declined 0.7% as spreads widened. Managers with higher risk budgets or exposures outside the US fell most. Political concerns (but not the usual European debt situation rumors) spiked a number of spreads wider. The Special Situations Index was flat on the month. Managed Futures continue to find little traction. The Lyxor Long- Term CTA Index declined 3.6% (-7.1% year-to-date) and the Short-term CTA Index fell 2.5% (-2.5% year-to-date). Managers were typically long bonds, equities, energy, and precious metals. Risk asset prices tumbled during the month and caused losses, but positions in potentially offsetting assets did not offset the losses.

Uncertainty regarding the outcome of the US elections has risen, leading managers to reduce risk somewhat in October. We expect hedge fund managers to express stronger convictions now says Stefan Keller, Head of Managed Account Platform Research & External Relations at Lyxor AM.

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   

Banner

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Commodities - Oil wreaking havoc on small-cap energy stocks sliding 36%[more]

    From Bloomberg.com: Owning almost anything in the U.S. stock market has been a losing proposition since September. Owning smaller energy companies has been a catastrophe. Hercules Offshore Inc. and Resolute Energy Corp. are among 19 oil-and-gas equities in the Russell 2000 Index that lost more than

  2. Investing - Hedge funds favor equity long/short, Strategic bond managers hedge against further high yield sell-off[more]

    Hedge funds favor equity long/short From Securitieslendingtimes.com: Equity long/short strategies will generate good returns for hedge funds in the future, according to a panel at this year’s Risk Management Association Conference on Securities Lending in Naples, Florida. Panellists Sand

  3. Legal - Ex-hedge fund analyst weeps as judge hands down 5 year sentence, Former Columbus investment manager Steven P. Moore indicted on theft charges, SEBI confirms ban for Hong Kong hedge fund, SEC announces enforcement action against compliance officer[more]

    Ex-hedge fund analyst weeps as judge hands down 5 year sentence From Hereisthecity.com: An ex-hedge fund analyst was sentenced to 5 years in prison for his role in insider-trading scheme. The New York Post reports that former hedge fund analyst Matthew Teeple was sentenced Thursday to fiv

  4. Goldman in talks to acquire IndexIQ[more]

    From Bloomberg.com: Can Goldman Sachs put ETF investors on a liquid diet? Goldman is in talks to acquire IndexIQ, Reuters has reported. Index IQ is a small exchange-traded-fund firm known mostly for products that replicate hedge fund strategies, called "liquid alternative" ETFs. While IndexIQ has 11

  5. Other Voices: CALPERS dilemma should be a warning to hedge funds wanting institutional investors[more]

    From Ian Hamilton, founder of IDS Group. A quick comment on the CALPERS’ disinvestment from the hedge fund market and the jitters it is causing. Pension Funds should not be sheep and follow CALPERS’ decision as the issues that CALPERS has with hedge fund investments are in many ways unique t