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Alternative Market Briefing

Global macro hedge funds hold tight on European currencies' shorts

Friday, June 16, 2017

Komfie Manalo, Opalesque Asia:

Global risk appetite remained steady during the recent months, despite continued investor concerns over asset price valuation and political risks, Lyxor Asset Management said in its latest briefing. The MSCI World is up 3.5% in Q2 as of early June. Yet, sovereign bond yields remain very low and yield curves flattened, raising questions over investors' confidence on the pace of economic activity going forward.

Philippe Ferreira, senior strategist at Lyxor AM said that hedge fund performance has been disparate across strategies. Event driven funds extended their winning streak in May, fueled by merger arbitrage. In parallel, macro strategies underperformed, on the back of long positions on the USD and on hard commodities.

He said, "In terms of positioning, it is striking to note the extent to which CTAs and global macro now differ with regards to European currencies. In the context of improving economic momentum in the Eurozone and snap general elections in the UK, CTAs have rushed to the exit, trimming down net short positions on the EUR and the GBP vs. USD. In parallel, global macro funds hold tight on their European currencies' shorts."

Going forward Lyxor maintains a preference for bottom up strategies versus top down ones. That implies a preference for event driven and L/S equity compared to global macro and CTAs. Trend followers are too reliant on trends in equity markets.

Ferreira added, "Within global macro, we prefer m......................

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