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Alternative Market Briefing

CTAs extend winning streak in June, best performing strategy in H1

Tuesday, July 02, 2019

Laxman Pai, Opalesque Asia:

Hedge funds strategies posted flat returns during the period under review, said Lyxor in its Weekly Brief.

L/S Equity Directional, L/S Credit and Market Neutral L/S outperformed, while Merger Arbitrage remained flat.

CTAs were slightly down (-0.3% last week) but outperformed in June (+2.8%) due to their long equity/ long fixed income positioning.

In June, all hedge funds strategies delivered positive returns. Merger Arbitrage continues to lag, while Market Neutral L/S performance improved, up +0.4%.

"We upgraded Market Neutral L/S to Overweight recently. On year-to-date basis, all hedge fund strategies are also in the black," Lyxor said.

CTAs outperformed (+8.4%), followed by Special Situations (+5.4%), Directional L/S (+4.5%) and L/S Credit (4.2%). Low beta strategies such as Market Neutral L/S (+0.4%) and Merger Arbitrage (+1.6%) underperformed.

CTA and Global Macro strategies - good track record in bad times

Both CTAs and Macro strategies have been historically resilient when risk assets experience major downturns.

During episodes in which equity prices experienced a major blow (DotCom bust, Global Financial Crisis, Eurozone sovereign crisis and CNY devaluation in 2015), both Global Macro and CTA strategies outperformed hedge fund strategies and risk assets.

Their resilience was related to several factors, such as their diversified and systematic nature, but also to their ability to take contrarian bets i......................

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