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Alternative Market Briefing

Lyxor says market conditions in Q4 to be less supportive than Q3

Wednesday, October 19, 2016

Komfie Manalo, Opalesque Asia:

Lyxor Asset Management said that it expects the last quarter of 2016 to present more challenges for the markets than the previous third quarter.

Philippe Ferreira, senior strategist at Lyxor AM, said in Lyxor’s latest hedge fund briefing, "Heading into Q4, we believe that market conditions are likely to be less supportive than in Q3. Key political milestones (U.S. elections, Italian referendum), renewed question marks about European banks and the likelihood that the Fed will tighten in December may fuel market uncertainty. This comes on top of rich valuations across the board. We have thus turned more defensive on L/S equity strategies. Our preference goes to managers with low net exposure and positioned on quality/low beta stocks. We maintain market neutral long/short at slight overweight, as the strategy is usually protective when implied volatility rises."

Commenting on event-driven strategies, Ferreira said that Lyxor has special situations funds at slight underweight. He said that the she strategy has an elevated beta vs. the MSCI World and is, thus, sensitive to market downturns. It is also exposed to political risk, which has increased for the health care sector in the U.S. as candidates for the U.S. presidency have expressed their willingness to control drug prices. The industry has long been an important sector for event driven managers.

He added "We reaffirm our stance on m......................

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