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Alternative Market Briefing

Hedge funds maintain cautious stance on equities, race to the bottom fuels CTAs and global macro

Tuesday, February 09, 2016

Komfie Manalo, Opalesque Asia:

Hedge funds maintain a cautious stance on equities in the week ending Feb. 02 as the Lyxor Hedge Fund Index was slightly up 0.3% in January (-1.0% YTD), Lyxor Asset Management said in its Weekly Briefing.

Philippe Ferreira, a senior strategist at Lyxor AM, said that the median equity beta on the Lyxor platform reached new lows (10%), a level last seen in August 2012. Across hedge fund strategies, CTAs have cut their net exposure to equities, turning short. Meanwhile, L/S equity funds remained cautious, a strategy that paid off at the end of 2015. Asian L/S equity managers in particular continued to decrease their exposure to equities.

Ferreira commented, "Going forward, markets remain concerned about recession risks in the US and the declining marginal impact of central bank actions. Translated into hedge fund allocation, a very defensive investor would favor a 100% allocation to CTAs. Managed Futures will be the only hedge fund strategy delivering positive returns if US equities enter bear market. We do not fall into the group of pessimists. We note that US consumption continued to grow at a robust pace in Q4 last year and real wages continued to move higher into 2016. This should ultimately support activity and lead to a rebound in risk assets at a later stage."

CTAs and global macro lead gains

Lyxor added that central banks have re-engaged into a race to the bottom over......................

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