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Lyxor Global Hedge Fund index +2.1% in March, long/short credit arb +3.9% (+4.38% YTD)

Wednesday, April 14, 2010
Opalesque Industry Updates - 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 +2.1% in March.

Generally quiet and trending markets yielded a robust month of gains for many hedge fund managers in March 2010. Equities rose sharply, credit spreads reversed their widening due to worries over February’s Greece worries, and volatility drifted ever lower. Managers with a long bias toward riskier assets benefited more than their more conservative peers.

Short-Term CTAs rebounded from their recent slide, gaining 1 % on the back of steadily rising equity markets. Similarly, Long-Term CTAs generated significant performance numbers, rising 4.8%. Many CTAs benefited over this period due to the generally buoyant markets in equities and metals, as well as the strengthening of the USD versus the euro. Short-Term CTAs lagged their potential, as some funds have decreased risk exposures following recent drawdowns.

The Lyxor Global Macro Index was up +1.3% on the month, but performances varied widely across managers. The strategy contains managers with a variety of opinions on the outlook for the global economy, and the returns reflect that fact. Long equity positions were a strong return driver for bullish managers and short ones were a drag for more pessimistic ones. A weaker dollar versus Emerging Markets currencies and a weaker euro provided the wherewithal for gains. The Fixed Income Arbitrage managers benefited from the positive environment, gaining +2.7% (despite the worries of many commentators regarding the Fed’s exit strategies).

L/S Credit Arbitrage managers posted a solid +3.9% gain on the month. Similarly, the Lyxor Distressed Index rose +0.6%. Despite lingering difficulties and fears regarding the European sovereign debt situation, spreads in credit markets generally tightened. Gains in the distressed space came from defaulted bond positions and restructurings. Three significant factors contributed the modest performance of managers in the Lyxor Convert Arbitrage Index, which rose +0.6% over the period (with a year-to-date performance of -0.5%). Rallying equity and credit markets provided offsetting drivers, with lower volatility pressuring valuations and tightening credit spreads supporting them. Issuance of new bonds was quite strong compared to recent months, although issuance significantly lags the highs of the mid-2000s.

Performance in the Event Driven space continued to be strong. The Lyxor Merger Arbitrage Index continued its steady rise (+1.6%), while the Special Situations Index managers benefited (+2.7%) from strong performance in both equity and credit markets. Gains in financials provided a significant boost to many Special Situations managers. Within the equity space, the Lyxor Indexes show broad-based gains. Not surprisingly, the L/S Equity Long Bias Index led the pack with +2.6% gains, although the Variable Bias Index followed close behind with +2.0% gains. Equity strategies with structurally low market exposure were able to generate alpha, but the absolute numbers naturally lagged their directional peers in such a strongly directional market. The Statistical Arbitrage Index and the Market Neutral Index gained both +0.8%.

Full performance table: Source

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