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Alternative Market Briefing

Long/short and event driven hedge funds benefit from U.S. elections

Thursday, December 22, 2016

Komfie Manalo, Opalesque Asia:

Hedge funds were cautiously positioned ahead of the U.S election and as a result failed to capture the market rebound, Lyxor Asset Management said in its December Hedge Fund Briefing.

Philippe Ferreira, Senior Strategist at Lyxor AM, commented, "November was an eventful month for investors. The victory of Donald Trump at the U.S. presidential election surprised pollsters and proved supportive for risk assets, against expectations. The MSCI World was up 2.7% while fixed income markets continued to experience headwinds as the improved growth outlook led to a rise in bond yields."

CTAs underperformed, down 1.1%, on the back of long fixed income exposures and trend reversals on commodities, in particular energy. The FX bucket also detracted as long positions on both EM currencies and the JPY dragged down performance in the wake of the election of Trump.

On a positive note, L/S equity and event-driven outperformed. In particular, strategies with a higher market exposure delivered returns in the 1-1.5% range in November. Merger arbitrage benefitted from the continued deal spread compression across a number of large deals, such as Monsanto/Bayer and LinkedIn/Microsoft. On the L/S equity side, managers with a value bias, i.e. exposed to companies with lower valuations, outperformed markedly. Meanwhile, market neutral L/S equity managers suffered another drawdown in November.

New mark......................

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