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Laxman Pai, Opalesque Asia: Alternative strategies appear overall attractive but dispersion across strategies might be high, said Lyxor in its weekly brief.
"As we start 2019, we are positioned around three axes: reduce exposure to high beta strategies, reduce sensitivity to Momentum, and leverage on the U.S. M&A cycle," said Lyxor's Cross Asset Research team.
"We maintain our overweight on Merger Arbitrage, which should perform, reasonably decorrelated from market trends. We also remain overweight on Fixed Income Arbitrage, which has been a good diversifier when equity volatility rises," it said.
The dominance of speculative drivers early this year would keep on unsettling long fundamental strategies, either forced to stay on the sidelines or to take reckless risks, Lyxor said.
"We downgraded L/S Equity strategies that show high market exposure and sensitivity to Momentum. We also downgraded Special Situation strategies to Neutral, skeptical that fundamental rationales will be rewarded in the short-term," it added.
L/S Equity rebounds after a dreadful quarter
The market rebound since end of December fueled strategies most exposed to risk assets such as L/S Equity and Special Situations. This is in sharp contrast with performance in Q4-18, which was dreadful.
"Our preferred strategies are those who can navigate fast changing market conditions like those we experienced recently. Merger Arbitrage and Fixed Income Arbitrage have met expec...................... To view our full article Click here
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