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Laxman Pai, Opalesque Asia: In a context were both equity and bond markets rallied in Q1, hedge funds delivered returns close to +2.5%, Lyxor said in its Weekly Brief.
According to the Lyxor Global UCITS peer group, high beta strategies such as Special Situations, EM-Global Macro and directional L/S Equity outperformed (+3.5 to +4%).
Meanwhile, relative to others, low beta strategies such as L/S Equity Market Neutral and Merger Arbitrage underperformed (+0.5% to +1%). L/S Credit and CTAs delivered returns in a range of +2% to +2.7%.
CTAs delivered strong returns both last week and in March (+2.9%), which compensated for the losses in January when their short equity positioning detracted from performance.
CTAs have recently benefitted from the rally in both bond and equity prices. Momentum signals are strong in those asset classes (see charts below) as the Federal Reserve continues to surprise market participants with a dovish stance.
At the latest FOMC meeting on March 20th, it announced the end of the balance sheet runoff as soon as end-September 2019, earlier than previously expected.
"Despite CTAs currently experiencing green shots of recovery, we maintain a Neutral stance on the strategy for the medium term," said Lyxor.
"We continue to have limited visibility over a 6 to 12 month timeframe due to issues such as Brexit or trade wars, which have the potential to cause abrupt trend reversals," it added.
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