Fri, Sep 4, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Lyxor research finds hedge funds are well positioned for year-end 2013

Monday, October 21, 2013
Opalesque Industry Update - Global growth should remain firm driven by economic strength in developed markets and the backdrop is supportive for higher equity prices. The US economic recovery remains on track despite a drag from reduced government spending and uncertainty about budget resolution. Economic trends in Europe and Japan are also positive and should benefit corporate earnings. The major central banks are erring on the dovish side, flooding markets with liquidity while equity risk premiums remain attractive.

In this context, we prefer directional equity strategies that benefit from both alpha and beta. Our favorite Hedge Fund strategies to express the pro risk theme are Long/Short Equity. Special Situation funds have also shown an ability to monetize actions such as activism, recapitalization, spinoffs and mergers.

The normalization process continues with healthy stock dispersion and relatively benign volatility. This translates into a large opportunity set for L/S Equity hedge funds to express bottom-up ideas. Talented stock pickers can benefit from both alpha returns from stock selection and beta from rising equity prices.

Global Macro funds should navigate well in an environment where major adjustments are taking place and we upgrade the strategy. The last decade’s massive capital flows into emerging markets may start to reverse as funding costs edge higher, revealing a growing differentiation across assets and regions. Central banks of vulnerable countries could need to raise policy rates to prevent capital outflows and curb inflation, putting further pressure on their domestic demand. Macro funds can express emerging market views in foreign exchange, fixed income and equities. In addition, in the developed world, the eventual normalization of monetary policy away from extraordinary measures plays into the hands of Global Macro funds.

We downgrade the L/S credit strategy to a relative underweight because of limited opportunities in the space and to emphasize our preference for other strategies. We are also cautious on fixed income arbitragers and other strategies which are vulnerable to higher interest rates in the medium term.

Lastly, we maintain our slight overweight stance on long-term CTAs despite disappointing returns in 2013. Performance drivers, such as trend and persistence, could improve once policy risks fade away, allowing the strategy to catch up.

“All in all, we believe Hedge Funds are well positioned to capture further upside for the remainder of 2013” says Jeanne Asseraf-Bitton, Head of Global Cross Asset Research.

References:
Lyxor AM, Cross Asset Research: Keep Favoring Equity, Fourth Quarter 2013, www.lyxor.com


Recent related coverage:
08.10.2013 Lyxor hedge fund index up 1.13% in September, +3.17% year to date

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. Cliff Asness attracts $360 million as liquid alternative funds hold up[more]

    From Bloomberg.com: As U.S. stocks suffered their worst month in more than three years in August, Clifford Asness’s managed futures fund was able to profit. Investors are taking notice. The $9.12 billion AQR Managed Futures Strategy Fund pulled in an estimated $360 million in net subscriptions last

  2. Opalesque Exclusive: When the SEC calls, fund managers need to get out of their own way[more]

    Bailey McCann, Opalesque New York: New pressure is hitting alternative investment funds from all angles. So far this month both hedge fund and private equity players have seen enforcement actions, and subsequent fines over fees, disclosures, and misleading statements. Citi one of the biggest

  3. Performance - Einhorn and Loeb's hedge funds both decline 5% in August, Some target-date funds miss in the market turmoil[more]

    Einhorn and Loeb's hedge funds both decline 5% in August From Reuters.com: Hedge fund billionaires David Einhorn and Daniel Loeb saw their main funds lose roughly 5 percent in August during a dramatic market sell off, two people familiar with their returns said on Monday. Einhorn's

  4. Fortress hedge fund manager David Dredge says markets trouble on the way[more]

    From AFR.com: David Dredge of global hedge fund Fortress has built a career studying, predicting and protecting against the world's major financial crises. The recent convulsions in global sharemarkets are "just the beginning" of a painful adjustment as money drains from the emerging market economie

  5. North America - Puerto Rico agency plans talks with hedge fund creditors[more]

    From WSJ.com: Puerto Rico’s Government Development Bank is planning to begin confidential debt-restructuring talks with hedge funds that own its bonds as early as next week, said a person familiar with the matter. The parties are set to discuss a plan under which the investors would lend additional

 

banner