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Komfie Manalo, Opalesque Asia:

Hedge funds slightly fell in the last week of February as the Lyxor Hedge Fund Index was down -0.8% (+0.7% YTD), with global macro funds underperforming. The strategy suffered in particular from the rise of the EUR vs. USD, lower German and UK bond yields, and the pullback in European equities.

Short term CTAs outperformed long term models from 21 to 28 February. The latter were hit by their substantial long position on equities. Yet, CTAs have delivered solid returns for the full month of February, up 3.2% (+0.2% YTD). However, event driven ended the week on a high note, fuelled by buoyant M&A activity in the U.S. Both special situations and merger arbitrage funds ended the week in positive territory.

"Event-driven performance has continued to move upwards over recent weeks in a context where M&A activity has remained strong since the beginning of the year, especially in the U.S," Philippe Ferreira, senior strategist at Lyxor Asset Management.

Event-Driven expected to outperform this year

Ferreira cited data from Dealogic claiming that global M&A activity has reached $490bn year to date (YTD) as of March 3. Although global M&A volumes are slightly down compared to the same period last year (-7%), this is mainly related to lower dealmaking in Asia (-36%, including Japan).

M&A volumes are up 6% YTD in the U.S., to USD 221bn, led by the oil & gas and health care sectors......................

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