Mon, Apr 21, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Lyxor Hedge Fund Index up 0.08% in April, 3.2% year to date

Wednesday, May 08, 2013
Opalesque Industry Update - The Lyxor Hedge Fund Index was up +0.8% in April, bringing year-to-date performance to +3.2%. 12 Lyxor Strategy Indices out of 14 ended the month in positive territory, led by the Lyxor L/S Equity Market Neutral Index (+3.9%), the Lyxor CTA Long Term Index (+3.0%) and the Lyxor Merger Arbitrage Index (+1.5%).

Risk assets mostly rallied in April after a modest sell off in the beginning of the month and most hedge fund strategies generated positive returns for the month. Economic data continues to paint a picture of a mixed recovery with disappointing data in Asia and Europe and shallow growth in the U.S. Equity markets corrected about 5 to 10% in mid April due to disappointing macro news but data in the second half of the month rebounded slightly.

From a bottom up perspective, the Q1 earnings season in the U.S. also firmed slightly from a weak start. Companies on average beat EPS estimates by 6% whereas the pace was closer to 3% at the start of the earnings season. Central banks also reminded investors that accommodative policies can be further eased if data remains weak. Risk assets rallied after the Federal Reserve noted it may expand QE if the data warrants it. The ECB was also more dovish than investors expected.

Strategy-wise, L/S equity funds generated positive returns in April and generally benefitted from the rally. Variable and long bias strategies were up 0.4% and 0.6% respectively benefitting from net long exposure to the market. L/S Equity Neutral strategies were up 3.9% and showed the best performance in April. Correlation among stocks remains low at about 30% and continues to provide a fertile environment for stock picking on both the long and short side. Additionally, earnings season is providing company specific catalysts for additional dispersion.

Event driven strategies performed well with Merger Arbitrage strategies up 1.5% in April, Distressed up 0.8% and Special Situations up 0.1%. Merger Arbitrage was helped by the general risk on environment where deal spreads mostly tightened. The pace of new deal announcements is disappointing given the level of cash on company balance sheets. Companies are generally focusing on returning money to shareholders via buybacks and dividends instead of making big acquisitions.

Credit funds generated strong performance with L/S Credit Arbitrage up 1.3% and Convertible Bonds up 0.8% as well. The compression of spreads and lower bond yields continued in April which helped the strategies. New bond supply is outpacing last year’s level as companies take advantage of the low rate environment. This is highlighted by Apple’s record bond offering at the end of April which was in high demand despite the small premium over the risk free rate. Net fund flows remained positive, with loan funds continuing to see greater inflows than that of bond funds. In structured credit, new CLO issuance tumbled in April as new regulation was enacted that now requires banks to take a larger capital charge for such assets (legacy CLOs are not subject to the new guidelines).

Long term CTA strategies did well in April with the average fund up 3.0%. Long and medium term trends persisted in many markets as equity prices climbed while bond yields and commodity prices declined. Short-term CTA’s performance was weaker with the average fund down 0.9%. Short-term strategies were hurt by seesaw price swings in April caused by weaker than expected economic data.

“Market reaction remains liquidity driven and hedge fund exposures show that managers continue their constructive positioning” says Stefan Keller, Head of Managed Account Platform Research & External Relations at Lyxor AM.

Press release
Lyxor Flash - Alternative Investment Industry Barometer, April 2013

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. Opalesque Exclusive: Classic Auto Funds Limited (CAF) launches several car investing funds[more]

    Bailey McCann, Opalesque New York: A new trend in alternative alternatives is emerging - car appreciation funds. Classic Auto Funds Limited (CAF) is the first to market with several funds that make super elite luxury cars into real asset investments. As a result of growing overseas demand couple

  2. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  3. Opalesque Exclusive: Hedge fund replicators evolve[more]

    Bailey McCann, Opalesque New York: Hedge fund replicators as a group of products tend to get a bad rap from hedge fund managers who suggest that the best a replicator can offer is dynamic beta capture. A

  4. Opalesque Exclusive: Pensions, endowments, family offices reconsider life settlement investments[more]

    Bailey McCann, Opalesque New York: Hedge funds were once the largest investors in the life settlement industry, now the industry is seeing more interest from pensions, endowments and family offices directly. Life settlements have always been considered a niche part of the investing landscape, an

  5. SEC allows investment funds to use social media[more]

    Bailey McCann, Opalesque New York: The Securities and Exchange Commission (SEC) has released new guidance letting investment funds and advisors use social media to promote client reviews. The guidance seeks to assist investment managers in developing compliance policies and procedures reasonably