Sat, May 27, 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. Investing - Tudor Jones backs AI hedge funds, Massive hedge fund trades highlight insider buying: GE, Pentair, Tempur Sealy, Apollo Global and more, Hedge funds big wigs are buying consumer and selling tech, here's the stocks[more]

    Tudor Jones backs AI hedge funds From FT.com: Hedge fund magnate Paul Tudor Jones has invested in a brace of artificial-intelligence powered "quantitative" hedge funds, underscoring the increasing acceptance that the industry will need to turn more to technology and away from traditional

  2. Soon hedge fund investors won't bet on a man, they will bet on a machine[more]

    From Forexlive.com: The Wall Street Journal is in the midst of a 17-part series that looks at the rise of quant funds. The AUM and money invested in quant funds still trails traditional asset managers but the gap is closing. What's truly amazing is volume. Quant funds make up 27% of trading vo

  3. Investing - China's HNA wants to invest in Value Partners, Risk parity investors reap rewards from rebalancing act, SoftBank's $100 billion tech fund rankles VCs as valuations soar[more]

    China's HNA wants to invest in Value Partners From Reuters.com: HNA Group has alighted on a logical, if pricey, target in Hong Kong. The deal-hungry Chinese travel conglomerate known for overpaying wants to invest in Value Partners, one of Asia's few sizeable independent asset managers,

  4. Opalesque Exclusive: Investors warm to ESG, but seek standardization[more]

    Bailey McCann, Opalesque New York: Asset managers and asset owners plan to double their investment in Environmental, Social and Governance (ESG) driven strategies over the next two years, according to a survey from BNP Paribas Securities Services. The report, "Great Expectations: ESG - what's nex

  5. Opalesque Roundtable: France's hidden strengths in AI and machine learning[more]

    Komfie Manalo, Opalesque Asia: All nations offer their strengths and weaknesses, but one that is undisputed is the quality of the French scientists, claimed Guillaume Vidal, co-founder of French technology startup Walnut Algorithms at the