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Alternative Market Briefing

Macro hedge funds and CTAs outperform in December on strong dollar

Monday, January 16, 2017

Komfie Manalo, Opalesque Asia:

The last month of 2016 saw risk assets climbing higher, as part of expectations that the new U.S. administration will remove barriers to growth and investment, Lyxor Asset Management said. December also saw the Fed hiking interest rates but the impact on the fixed income asset class was rather muted.

This environment was supportive for hedge funds. The Lyxor hedge fund index was up 1.3% in December, led by global macro and CTA managers.

Philippe Ferreira, Director of Senior Cross-Asset Strategist at Lyxor AM, commented, :Going forward, we believe that hedge funds could experience a better environment in 2017 compared to 2016, which was a challenging year overall. The new U.S. administration is aiming at extending the economic cycle with supportive fiscal measures and the removal of regulatory barriers to investment. Meanwhile, we expect the Fed to stay accommodative overall and both bond yields and energy prices to remain supportive for growth. There is thus room for improved economic expectations to be met."

Macro specialists benefitted from both exchange rate movements and equity allocations. Their short stance on the EUR, GBP and JPY vs. USD was rewarding considering the fact that the dollar continued to edge higher against most currencies. Meanwhile, their preference for European and Japanese equities was also a source of gains as both markets outperformed U.S. equities in D......................

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