Fri, Aug 18, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Lyxor Research: More upside in 2013 for hedge funds

Wednesday, July 17, 2013
Opalesque Industry Update - The remainder of 2013 is setting up for further gains and hedge funds are positioned to take advantage of the opportunities. The US economy is expanding steadily and growth will likely accelerate in the 2nd half of the year as fiscal restraint wears off. Markets have digested the higher move in bond yields and any further rise in yields will occur because of firmer economic data.

Central banks globally are almost unanimously dovish which should translate into asset reflation and easy financial conditions. The Bank of England and European Central Bank were the latest banks to use “lower for longer” language to drive down interest rates. Chairman Bernanke has also indicated that the Fed will hold rates at the current 0% level for the foreseeable future.

At the same time, economic data is improving. High velocity indicators in Europe such as PMI are increasing from a dip in 1Q and broad data in the US such as jobs, spending and production are also suggesting the economy is improving.

The volatility spike and risk aversion in June presents an attractive entry point and opportunity going forward. Risk premium increased because of higher rates and concerns about emerging markets. Both of these issues have stabilized. Bond yields in the US have repriced sharply since May but the pace of the increase will likely slow going forward. China concerns have also dissipated as the authorities introduced more liquidity into the market. We expect risk premium normalization to continue which translates into higher asset prices.

Equities are our favorite asset class and a key beneficiary of asset . Based on our metrics, equities are significantly more attractively valued than other assets at this stage in the cycle. Within equities, Japan is our most overweight region because it offers the best upside given the size of central bank stimulus and attractive valuation.

In our Alternative Strategies ranking, we have an overweight bias to directional strategies in the equity space. L/S Equity discretionary and systematic neutral strategies should benefit from a high dispersion, low volatility environment. We upgraded Long term CTAs to slight overweight after a challenging 2Q because we believe the factors responsible for the soft performance, such as a spike in rates, will be more benign going forward. On the credit side, the market appears richly valued and we downgraded L/S credit to neutral. We advocate focusing on relative value funds in the credit space with limited interest rate risk.. Based on our metrics, equities are significantly more attractively valued than other assets at this stage in the cycle. Within equities, Japan is our most overweight region because it offers the best upside given the size of central bank stimulus and attractive valuation.

In our Alternative Strategies ranking, we have an overweight bias to directional strategies in the equity space. L/S Equity discretionary and systematic neutral strategies should benefit from a high dispersion, low volatility environment. We upgraded Long term CTAs to slight overweight after a challenging 2Q because we believe the factors responsible for the soft performance, such as a spike in rates, will be more benign going forward. On the credit side, the market appears richly valued and we downgraded L/S credit to neutral. We advocate focusing on relative value funds in the credit space with limited interest rate risk.

References:
Lyxor AM, Cross Asset Research, Third Quarter 2013, www.lyxor.com

Bg

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. Opalesque Exclusive: Albright Capital puts a value lens on emerging markets[more]

    Bailey McCann, Opalesque New York: Over the past decade, investors have steadily increased investments in emerging markets private funds. Allocations to the cohort have increased from $93 billion in December 2006 to $564 billion in September 2016, according to data from research firm Preqin. Howe

  2. Comment: "Long-Term Investing": What managing drawdown risk can do to your long-term returns[more]

    Matthias Knab, Opalesque: Real Investment Advice writes on Harvest Exchange: Last week, I was having lunch with a prospective portfolio management client discussing the curre

  3. Jasper Capital International joins Hedge Fund Standards Board[more]

    Komfie Manalo, Opalesque Asia: Diversified and systematic investment firm Jasper Capital International has become the second China-based signatory to the Hedge Fund Standards Board (HFSB), an organization that brings hedge fund managers and investors together to set standards for the hedge fund i

  4. Investing - Hedge-fund honchos including David Tepper are loading up on Alibaba, Billionaire hedge fund manager Stanley Druckenmiller is betting big on the Chinese consumer, Big-name U.S. hedge funds shed healthcare stocks during the rally in second-quarter, U.S. hedge funds bearish on FAANG stocks in second-quarter, Hedge fund titan Viking Global made a $680 million bet on scandal-plagued Wells Fargo[more]

    Hedge-fund honchos including David Tepper are loading up on Alibaba From CNBC.com: David Tepper's Appaloosa Management and three other he ge funds took new stakes in Chinese e-commerce giant Alibaba in the second quarter, according to the latest quarterly filings. Appaloosa disclos

  5. FinTech - Danger: Crowdfunding on the wrong platform could force you to go public[more]

    From LinkedIn.com: Some equity crowdfunding platforms are putting startups at serious risk. Working with a platform that doesn't structure your deal appropriately could jeopardize your ability to raise future capital or worse, force you to become a public reporting company. The emergence of eq