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Komfie Manalo, Opalesque Asia: Hedge funds strongly recovered from the selloff, with only two exceptions: i) the fixed income funds, flat this week, still isolated from the epicenter, and ii) neutral equity funds, still suffering from sector and factor rotations, Lyxor Asset Management said in its Weekly Briefing.
The risk-on sentiment supported hedge funds, with the Lyxor Hedge Fund Index up +1.4% from 13 February to 20 (-0.4% YTD). The more directional strategies outperformed. The L/S
Equity variable bias index was up +1.2%, fuelled by solid returns from emerging market and the highest beta driven funds.
Lyxor AM senior strategist Jean-Baptiste Berthon, commented, "Stock dispersion soared a few days before the selloff, but we expect a rapid mean reversion. Historically, higher dispersion following spikes of volatility only lasted when coinciding with a major macro shift. Managers will not enjoy the extra arbitrage potential for long. By contrast, we expect that the current stock re-correlation will last, with a common set of drivers likely to stay on the radar (including rates, inflation, dollar)."
The report adds that special situations funds outperformed from several of their hard-catalyst stocks delivering strong earnings. Merger arbitrage thrived from their M&A positions, including the NXP vs. Qualcomm deal.
Finally, CTAs outperformed as they captured some of the equity recovery, despite their recent de...................... To view our full article Click here
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