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Alternative Market Briefing

Hedge funds bounce back as equity markets rebound with modest beta contributions seen ahead

Tuesday, April 10, 2018

Komfie Manalo, Opalesque Asia:

The hedge funds space bounced back last week supported by the rebound in equity markets as strategies with elevated beta outperformed, such as special situations and L/S equity. Lyxor Asset Management said in its weekly report that hedge funds remained resilient with market neutral rebounding due to the slight rebound in momentum and quality stocks.

By contrast, CTAs underperformed. The slide in energy prices and the depreciation of the EUR and JPY vs. USD were the main headwinds to trend followers. However, their long but moderate positions on equities managed to alleviate part of the losses.

Lyxor AM senior strategist Jean-Baptiste Berthon, commented, "In perspective, we see markets transitioning from goldilocks to late cycle. We still favor equities over bonds but risks are building up. At a time when the macro momentum is peaking, monetary normalization is accelerating and concerns about protectionism are intensifying. Meanwhile, the pulse in European and Japanese reforms is yet to materialize and could be slowed by politics."

Tariff war causes mixed economic prints

According to Berthon, amidst the mixed economic prints, confusion intensified this week with multiple gyrations in the tech sector and the release of detailed tariff threats on both U.S. and Chinese sides.

He said that the coming quarter is likely to offer bumpier and modest beta contribution for hedg......................

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