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Alternative Market Briefing

Special situations hedge funds gained the most ahead of French election

Wednesday, May 03, 2017

Komfie Manalo, Opalesque Asia:

The first round results of the French election shifted markets back to a risk-on mode and supported hedge funds. The Lyxor Hedge Fund Index was up +0.4% in the week from 18 April to 25 April 2017 (+0.9% YTD), Lyxor Asset Management said in its Weekly Briefing.

Special situations outperformed, thriving from European investments. Merger arbitrage benefitted from the spread tightening in the NXP Semiconductors/Qualcomm deal. CTAs posted gains, with exposure to equities as the main contributor. The other portfolios were detrimental. Lower EUR, falling oil prices and rising long-term bond yields hurt performance.

"All strategies were up last week," said Jean-Baptiste Berthon, senior strategist at Lyxor AM. "Hedge funds captured the upside which was a function of the protections implemented ahead of the French vote. Special situations outperformed, as their cyclical and turnaround positions surged. CTAs' strong long equity exposure offset losses in their short Euro and in their long Euro bonds. By contrast, hedges and relative positioning in global macro and L/S equity funds capped the upside."

Global macro's returns were milder. Relative value trades on equities and short European bond positions led the bulk of gains. However, managers suffered from their longstanding short EUR and long oil.

Berthon added that the markets and hedge funds were also supported by an upbeat earning seaso......................

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