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Alternative Market Briefing

Hedge funds rally on improved risk appetite in Europe

Tuesday, July 21, 2015

Komfie Manalo, Opalesque Asia:

The sharp improvement in risk appetite in Europe has benefitted the global macro managers who maintained their long European equities stance during the turmoil. The Lyxor Global Macro Index was up 1% (+4.3% YTD) as of end July 14.

The rebound came following the normalization in the European markets after the feared Grexit did not materialize and will not likely happen. The Eurostoxx 50 was up 9.5%, equity volatility fell 10% (VSTOXX), high yield spreads tightened 26 bps in Europe and the 10-year bund yield rose by the same order of magnitude, during the same period.

"From a global strategy standpoint, we upgraded our stance on European equities and peripheral bonds to overweight but refrained from changing our recommendations on alternatives. We maintain our preference for EU and Japanese long biased L/S Equity managers (vs US & EM). We remain neutral event driven and overweight long term CTAs and global macro," said Philippe Ferreira, senior cross asset strategist at Lyxor AM.

Event driven and L/S equity funds experienced a healthy rebound. This reflects the improving risk appetite but also the strong support provided by Chinese authorities to propel the local stock market. The measures that have been adopted since end-June are impressive. Yet, they also have the potential to deter foreign investors that may find these market interventions unsettling. For instance, regulators have b......................

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