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Alternative Market Briefing

Hedge funds benefit from upbeat market in January

Wednesday, February 01, 2017

Komfie Manalo, Opalesque Asia:

Hedge funds reaped benefits from the upbeat market movements. The Lyxor Hedge Fund Index was up 0.5% as of 24 January (-0.4% YTD), with CTAs and global macro managers outperforming. Fixed income arbitrage managers also did well in an environment where the implied volatility of rates has remained elevated since the Republican victory in the U.S. election. Thus, recent developments support our constructive stance on these strategies.

Both CTAs and macro managers benefitted from a weaker JPY vs. USD. In addition, CTAs delivered strong returns thanks to their long positions on equities and short duration stance on bonds. Event driven managers lagged behind (-0.2%), weighed down by poor results from merger arbitrage funds. However, they have since recovered due to their exposure to the Johnson & Johnson vs. Actelion mega merger deal.

Philippe Ferreira, Senior Strategist at Lyxor Asset Management, commented, "During his first week in power, President Trump moved decisively. He issued twelve executive orders in a matter of days, covering areas such as immigration, health care, trade, infrastructure and energy. U.S. stocks welcomed the move with a bang. The S&P 500 is up 1.3% since inauguration day. Treasury yields and the U.S. dollar have also moved higher as stronger economic activity should translate into higher inflation and a faster pace of monetary normalization."

He added that positions on Rite Aid, a retail pharmacy chain targeted......................

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