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Komfie Manalo, Opalesque Asia: The Swiss National Bank’s (SNB) decision to scrap the cap on the Swiss
franc (CHF) triggered a sharp movement on both local FX and equity
markets. The unexpected decision brings the currency not far from the
level where it stood when the SNB implemented the cap in September 2011,
said Lyxor Asset
Management in its Weekly Briefing.
According to Lyxor, several CTAs had long CHF exposures and will post
gains on the move. Meanwhile, some Global Macro managers were using the
CHF to fund long USD positions and will as a result post losses on the
market move. L/S Equity will be barely impacted by the fall in Swiss
stocks. A couple of managers had long positions on Swiss companies but
potential losses will be offset by other winning positions as the fall
in Swiss stocks did not impact European markets.
"Fundamentally, the SNB could not continue to intervene forever. Since
the cap was implemented in September 2011, the balance sheet of the SNB
rose by more than 40%, i.e. a massive injection of liquidity (the Fed’s
QE3 increased the balance sheet of the Fed by 60% between Sept. 2012 and
Oct. 2014). Implications for hedge funds are moderate. Although the data
we report here excludes the market move related to the SNB decision, we
can infer that CTAs are likely to post gains on the CHF rise, Global
Macro may post moderate losses, and L/S Equity would be barely
impacted," said Phi...................... To view our full article Click here
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