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Alternative Market Briefing

Hedge funds on a hot streak as FOMC is dovish on the industry

Wednesday, March 30, 2016

Komfie Manalo, Opalesque Asia:

Hedge funds recorded another strong week up +0.3%, with all strategies in positive territory, with the Lyxor Hedge Fund Index up 0.3% as of end Mar. 22 (-2.1% YTD), Lyxor Asset Management said.

Lyxor added that CTAs outperformed (0.8% as of Mar. 22 and +1.2% YTD), supported by the fall in bond yields post-FOMC (Federal Open Market Committee) meeting. The appreciation of some developed market currencies (such as CAD, AUD and JPY) vs USD and long exposure to precious metals added to gains.

Philippe Ferreira, senior cross-asset strategist at Lyxor AM, commented, "Event driven funds were +0.4%. Special situations benefitted from lower equity volatility, while merger arbitrage managers delivered gains on thinner spreads and few deal overbids. Long/short long bias funds (+0.7%) outperformed the full long/short equity strategy as managers benefited from net exposure back to pre-sell-off levels."

Most hedge funds benefited from dovish FOMC

A more dovish FOMC than expected on March 16 offered the equity rally another leg up. The Fed shaved off its growth and inflation forecasts and its median dot was revised two notches down. Bond yields weakened and the downward pressure on the dollar further supported oil prices and emerging market assets.

It benefitted most hedge funds strategies. CTAs recouped part of their recent losses on bonds. Global macro funds’ gains on bonds were......................

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