Wed, May 4, 2016
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   |   
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. Hedge funds see $14.3bn outflows in Q1, CTAs and multi-strategy lead net inflows[more]

    Komfie Manalo, Opalesque Asia: The hedge fund industry saw net outflows of investor capital in the first quarter of the year, totaling $14.3bn, data from Preqin showed. This continues from the $8.9bn overall net outflows that funds recorded in Q4

  2. Third Point calls Q1 "catastrophic" for hedge funds[more]

    Bailey McCann, Opalesque New York: The first quarter of this year was rocky for hedge funds based on aggregate performance from the industry, but now we are beginning to hear what the managers thought of it as quarterly letters make their way to investors. Dan Loeb, CEO of New York-based $17 bill

  3. Asia - Stabilization of China's capital outflows may hinge on Janet Yellen, Fink says China to do well this year as bubble threat postponed, Chinese hedge fund to invest in India’s infrastructure[more]

    Stabilization of China's capital outflows may hinge on Janet Yellen From Bloomberg.com: Whether China’s recent stabilization of its currency and capital outflows continues -- or downside pressure reignites -- may hinge in large part on Janet Yellen. If the Federal Reserve chair sticks to

  4. …And Finally - After all, judges are human too[more]

    From Newsoftheweird.com: In March, one District of Columbia government administrative law judge was charged with misdemeanor assault on another. Judge Sharon Goodie said she wanted to give Judge Joan Davenport some files, but Davenport, in her office, would not answer the door. Goodie said once the

  5. Comment - Unmasking the men behind Zero Hedge, Wall Street's renegade blog[more]

    From Bloomberg.com: Colin Lokey, also known as "Tyler Durden," is breaking the first rule of Fight Club: You do not talk about Fight Club. He’s also breaking the second rule of Fight Club. (See the first rule.) After more than a year writing for the financial website Zero Hedge under the n