Fri, Jul 21, 2017
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. Already above average, Singapore high-networth investors add hedge funds and alternative investments[more]

    Komfie Manalo, Opalesque Asia: An above-average proportion of Singaporean HNW wealth is allocated to alternative investments - the majority of which is held in hedge funds, according to the latest research by ReportLinker. In its report entitled, Wealth in Singapore: HNW Investors 2017

  2. Launches - Crypto boom: 15 new hedge funds want in on 84,000% returns, Crypto madness is striking VCs as Union Square analyst leaves to start new fund[more]

    Crypto boom: 15 new hedge funds want in on 84,000% returns From Forbes.com: With 43 projects raising $1.2 billion in initial coin offerings since May 1, according to Nick Tomaino's The Control, and with stratospheric returns for so many ICOs -- 82,000% for Ethereum, 56,000% for IOTA, 44,

  3. FinTech - The machines are coming... Elon Musk's grim warning, Tezos' $232 million ICO may just be the beginning, A gentle introduction to Initial Coin Offerings (ICOs), Billion dollar tokens, ICOS & crazy market swings WTF is going on!?, How AI is changing the way we invest, How the tech revolution is bringing flip-flops and beanbags to Wall Street, A 'machine-learning' approach to venture capital[more]

    The machines are coming... Elon Musk's grim warning From Tenplay.com.au: Tesla chief Elon Musk has called on US Governors to take 'decisive' action to curtail "the greatest risk we face as a civilization": Artificial Intelligence, or AI. Speaking at a meeting of the National Governor Ass

  4. News Briefs – Sears inks $200 million credit line from CEO Eddie Lampert's hedge fund, shares jump 9%, Rwanda: Global hedge fund to increase investments[more]

    Sears inks $200 million credit line from CEO Eddie Lampert's hedge fund, shares jump 9% Sears Holdings has landed a fresh line of credit, valued at $200 million, from its CEO Eddie Lampert's hedge fund, the retailer said Monday. Sears' stock climbed about 9 percent higher Monda

  5. Despite current limits, robo-advisors will be preferred investment solution for retail, gain importance for affluent and high net worth[more]

    Matthias Knab, Opalesque: Flynt, a Swiss FinTech focusing on proprietary technology platform for private and institutional clients, has published a brief paper on "Investing in the world of robo-advice and passive instruments". As investors will become more reluctant to pay for investment advi