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L/S Equity managers faced a difficult environment in which to make money. European and emerging markets surged mid-month (over 10%) before giving back a large portion of the gains as the month ended. US markets traded in a tighter range and ended the month down. L/S Equity Long Bias managers unsurprisingly ended the month down (-1.9%) as did L/S Equity Variable Bias managers and Market Neutral managers (both -0.4%). The worst performing L/S Equity strategy was Statistical Arbitrage (-2.0%), which struggled as macro events impacted all stocks simultaneously.

According to the Lyxor CTA Indexes, both Long-Term and Short-Term CTAs were able to preserve capital in June 2010. Both indexes were virtually flat on the month (-0.2% and -0.4% respectively). A few factors influenced this outcome. CTAs suffered in May, and many reduced their risk exposure in response. Markets also featured some offsetting moves. Long bond positions gained on the month, but this was offset by losses in long equity positions. Similarly, the popular short euro position made impressive gains early in the month, which were reversed by mid-month.

The Lyxor Global Macro Index was down -0.7% on the month as managers struggled with the same issues CTAs did. Managers with long equity or commodity exposures found them to be a drag on performance overall. Long bond, long gold, and short euro positions gained on the month.

Within the Event Driven Space, Merger Arbitrage managers were flat (-0.1%). The more volatile Special Situations managers were dragged down by their long equity exposure (-1.4%). Special Situations managers were able to offset losses in equities with gains in the long credit portion of their books. Similarly, the Lyxor Distressed Index was up 1.5% as long credit positions combined with short equity positions (as hedges) both gained.

The L/S Credit indexes posted positive performance on the month (+1.2%). Long credit positions generally rose as credit spread changes were swamped by declines in Treasury yields. On a related note, dislocations in fixed income markets receded over the month, allowing Fixed Income Arbitrage managers to post a robust +1.3% gain on the month.

www.lyxor.com

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