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Laxman Pai, Opalesque Asia: The dominance of speculative drivers early this year would keep on unsettling long fundamental strategies, either forcing investors to stay on the sidelines or to take reckless risks, Lyxor said in its weekly brief.
"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," the report said.
Overall, alternative strategies appear attractive but dispersion across strategies might be high, it said.
"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," Lyxor's Cross Asset Research team said in the report.
"We maintain our OW on Merger Arbitrage, which should perform, reasonably decorrelated from market trends. We also remain OW on Fixed Income Arbitrage, which has been a good diversifier when equity volatility rises," the weekly brief said.
"We would stay Neutral on L/S Equity neutral strategies, attractive for diversification, but still at risk from their momentum bias, while factors arbitrage could be unsettled by transversal political drivers. We are also Neutral CTAs which have now turned defensive, but which are vulnerable to streams of market reversals. We are neutral Global Macro. Most macro managers are def...................... To view our full article Click here
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