Sun, Aug 30, 2015
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. Investing - Hedge funds suddenly find real money is back in Argentina's debt, Elon Musk buys more SolarCity stock following hedge fund manager short, BlackRock plans to get into rental-home financing[more]

    Hedge funds suddenly find real money is back in Argentina's debt From Bloomberg.com: The real money is back in Argentina. Before the country’s default in July 2014 (its second in 13 years), most long-term investors abandoned its bond market. As they rushed out, Argentina became a favorit

  2. Activist News - Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping, Meet Europe's best activist investor[more]

    Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping From Businessinsider.com: Carl Icahn has picked his next target: Freeport-McMoRan. Icahn and a group of other investors have snapped up an 8.46% stake in mining company Freeport-McMoRan, according to a j

  3. North America - Hedge fund manager Ray Dalio’s challenge to the Fed[more]

    From Newyorker.com: For some reason, Janet Yellen, the chair of the Federal Reserve, decided to skip this year’s annual Fed conference in Jackson Hole, where monetary policymakers from the United States and abroad get together with some prominent academics to discuss the big issues of the moment. Th

  4. Opalesque Exclusive: Credit-focused hedge fund Numen Capital expects more volatility in Europe in coming months[more]

    Benedicte Gravrand, Opalesque Geneva: A London-based hedge fund, which has just hired two emerging managers, is cautious on Europe. Vassilis Paschopoulos and former Lehman’s colleague Nikos Kargadouris, launched a London-based credit-focused hedge fund called

  5. Performance - Hedge funds bruised by stocks’ meltdown, Capstone’s volatility hedge fund is having a monster month thanks to market mayhem[more]

    Hedge funds bruised by stocks’ meltdown From WSJ.com: Hedge-fund managers like to promise their investors protection from market swings. In the recent stock swoon, many were caught off guard. Billionaire managers such as Leon Cooperman, Raymond Dalio and Daniel Loeb are deeply in the red

 

banner