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Alternative Market Briefing

Hedge fund strategies experienced a symmetric move in January: Lyxor

Wednesday, February 06, 2019

Laxman Pai, Opalesque Asia:

Hedge fund strategies experienced a symmetric move a smarket conditions switched swiftly from panic mode to exuberance mode over the recent weeks.

Those who suffered in December rebounded last month (L/S Equity, Special Situations) while those who were resilient at the end of 2018 lagged behind, Lyxor said in its monthly report.

"Looking at the performance over the past two months, Event-Driven stands out as the outperforming strategy and Macro/ CTAs as the underperforming one according to broad benchmarks," Ferreira Philippe, Senior Strategist, Cross Asset Research - Lyxor Asset Management said.

CTAs suffered from the trend reversal in equities at the turn of the year, down 3.3% in January after a dismal year in 2018. Their long positioning on bonds is now at risk if improved economic expectations eventually translate into higher bond yields, as we expect.

"Where does it take us in terms of strategic allocation? First, we keep preferring strategies that managed to be resilient in recent downturns without suffering during the rebound. That includes Merger Arbitrage and Fixed Income Arbitrage and to a lesser extent L/S Equity Market Neutral and Global Macro. Second, we stay cautious on L/S Equity strategies with an elevated net market exposure and prefer flexible L/S Equity strategies that can adjust their beta according to market conditions. Third, the outlook on EM assets has improved with the Fed turning less hawkish. EM-focused G......................

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