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Komfie Manalo, Opalesque Asia:

The Lyxor Hedge Fund Index was up +0.4% from 10 October to 17 (+2.9% YTD), with CTAs outperforming, Lyxor Asset Management said in its Weekly Briefing. Lyxor explained that the momentum in equities contributed to CTAs which are set to outperform in October with +3.1% gains as of October 17.

In line with equity market movements, CTAs' net positioning on equities at 120% of net assets stands at a maximum since the industry began to collect this data in early 2012.

"Our perspective on CTAs has improved and we upgraded the strategy last month from underweight to neutral, said Philippe Ferreira, Lyxor AM Senior Strategist. "Yet, we refrain from upgrading to overweight as a result of unstable trend following conditions in asset classes such as fixed income and FX (while trend conditions have improved on commodities and remain strong in equities). On top of that, the very long positioning of CTAs on fixed income is vulnerable to the rise in bond yields, which we expect to raise due to factors such as buoyant economic activity/central bank normalization and the increased likelihood of tax reform in the U.S."

Ferreira explained that as the earnings season has begun in the U.S. and companies have thus far delivered positive surprises, the momentum in risk assets has shown no signs of abating. The MSCI World (local currency) is on track to deliver its twelfth successive month of positive total......................

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