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Alternative Market Briefing

Hedge funds’ defensive stance on commodities pays off

Tuesday, November 24, 2015

Komfie Manalo, Opalesque Asia:

The defensive positioning of hedge funds on the commodity complex has been rewarding as most hedge fund strategies are up in November and previous trends in FX and commodities continue unabated, according to Lyxor Asset Management’s Weekly Briefing.

The renewed fall in commodity prices has triggered another leg down in energy stocks in November, Lyxor said.

Lyxor AM senior strategist Philippe Ferreira commented, "CTAs outperformed last week as a result of their aggressive short positioning on commodities. Their long fixed income positions also benefitted from the deflationary pressures arising from the fall in commodity prices. In that respect, it is interesting to note that CTAs are rapidly adjusting their long fixed income positions downwards (see chart). In our opinion, the reduction of directionality on fixed income is a welcome move ahead of the likely December Fed rate hike. We remain overweight CTAs."

The Lyxor Hedge Fund Index ended the week flat (+ 0.4% YTD) as of Nov. 17 amidst volatile market conditions. CTAs outperformed, up 1% (-0.8% YTD), on the back of short positions on commodities and long USD trades. Long fixed income positions were also rewarding but CTAs are reducing the directionality on the asset class.

Event driven suffered a 0.6% drawdown (-4.7% YTD) as market conditions were adverse in the U.S. and the Mylan/Perrigo deal break caused losses for some m......................

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