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Alternative Market Briefing

Hedge funds to profit from greater dispersion, more typical asset relationships and rising volatility

Thursday, January 12, 2017

Komfie Manalo, Opalesque Asia:

Last week was rather uneventful week for hedge funds. Amid reduced trading volumes and a pause in the reflation trade, most Lyxor indices were about flat as the Lyxor Hedge Fund Index finished 0.1% as of January 3, Lyxor Asset Management said in its Weekly Briefing.

CTAs and macro funds stood out, in symmetry. The former lost on U.S yields and equities, the latter gained on their long U.S. bonds and short euro bonds. Global macro was the best performing strategy, up +0.8% during the period, with fixed income being the main contributor as the U.S. rate increase took a breather. On the flip side, CTAs continued their poor run down -0.9%. Their long bonds and energy were the main culprits.

"We expect less monetary accommodation, more fiscal push, and more policy ruptures to support an inflection in rates and inflation," said Jean-Baptiste Berthon, senior strategist at Lyxor AM. "Greater dispersion, more typical asset relationships and rising volatility might be in store, especially in the U.S. where the process is more advanced. These factors would benefit hedge funds."

Within L/S equity, European funds delivered strong performance mostly from their long positions in the financial, industrial and healthcare sectors. Their U.S. counterparts underperformed as U.S. stock markets paused after a standout last quarter.

Not everything is perfect

However, Bert......................

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