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Komfie Manalo, Opalesque Asia:

The on-going market trend is a friend of hedge funds, said Lyxor Asset Management in its latest hedge fund briefing. Lyxor AM said that hedge funds, which have adopted a defensive positioning since the last quarter of 2015, were relatively spared from the turmoil.

The Lyxor hedge fund index was down 1.3% in January, with CTAs outperforming (+3.2%) and Event-Driven underperforming (-2.5%). The MSCI World fell 6% during the same month.

Lyxor said, "Markets suffered a painful start to the year as China’s growth deceleration continued to send shockwaves globally. The tightening mode of the Fed and the earnings recession in the U.S. also added uncertainties to the outlook for risk assets. Brent oil prices were down 7% and high-yield spreads in Europe and the U.S. widened by more than 40 and 80 bps respectively. Amidst such risk adverse conditions, the dollar appreciated against major currencies and 10-year government bond yields in the U.S. and Germany fell by 30 bps approx."

The performance of CTAs during the recent market meltdown is remarkable. It highlights the fact that the power of diversification of the strategy in a portfolio remains intact. The strategy recently cut its exposure to equities and remains net short on energy, though the directionality on energy has lately been reduced as a result of t......................

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