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Komfie Manalo, Opalesque Asia: The markets' knee-jerk reaction following former FBI Director James Comey's memo alleging that the U.S. President tried to influence the FBI had limited impact on hedge funds as the Lyxor Hedge Fund index was up +0.4% (+1.6%YTD) from the week covering 09 May to 16 May 2017, with global macro and special situations outperforming.
In its latest Weekly Briefing, Lyxor Asset Management said that macro managers benefitted from the rise in oil prices and European equities. Dispersion edged higher across L/S equity funds' returns as the VIX surged amid political stress. Variable biased managers stand out.
Lyxor AM senior strategist Jean-Baptiste Berthon, commented, "Macro funds outperformed on their long European equities and long energy. Special situations continued to make steady progress. L/S equity fund returns were mixed, reflecting heterogeneous impact from the sudden market rotation."
He added that the volatility in U.S. bonds and dollar could rise ahead of the June Fed meeting and the start of the U.S. budget negotiations. CTAs' and macro's long bonds and long USD exposure vs. DM crosses are vulnerable to speculative political developments.
"We reiterate our preference for micro over macro approaches. We note that the ending earning season and the sudden sector rotations might result in more challenging conditions for Market Neutral funds," Berthon said.
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