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Komfie Manalo, Opalesque Asia:

It was another positive week for hedge funds. The Lyxor Hedge Fund Index delivered healthy returns up 0.4% (+2.5% YTD) from 03 October to 10 October, with CTAs outperforming as the CTA Broad Index gained 0.9% (-2.3% YTD).

CTAs' contrarian positions were rewarded during the week, in particular through their allocation in bonds (they are long, mainly in Europe), in FX (they are USD short, especially vs. non-G10 currencies) and in commodities (they are long gold). They also benefitted from their more cyclical exposures to equities and metals. The equity bucket paid off, Lyxor Asset Management said in its Weekly Briefing.

Jean-Baptiste Berthon, senior strategist at Lyxor AM commented, "Global macro funds continued to recover from previous losses, supported by long Japanese and emerging market equities. They also thrived from their long exposure to commodities, including gold, energy and copper. However, some profits were offset by losses in FX and fixed income."

He added that diversified L/S equity and event driven managers continued to be supported by bullish equities. During the week, Asian and emerging market funds L/S equity outperformed.

Focus on global macro funds as more directionality is expected

Lyxor noted that cracks in the reflation trade emerged after the marginally dovish Fed's minutes were released and with doubts intensifying about the tax-cut package.......................

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