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Alternative Market Briefing

Hedge funds help to deal with the ongoing market uncertainty

Tuesday, September 10, 2019

Laxman Pai, Opalesque Asia:

Despite colossal headwinds related to trade tensions, the Brexit deadlock, and the manufacturing recession, asset prices have been incredibly buoyant so far this year, Lyxor said in its weekly brief.

Equities are recovering from the August drawdown and are approaching late-July record levels. The asset class could deliver the highest yearly returns since 2013 (MSCI World +18% year-to-date). Meanwhile, global bond benchmarks are on track to deliver their best year since 2000 (Barclays Global Aggregate +8.8% year-to-date).

In this context, hedge funds are also posting robust returns. The Lyxor Global Alternative UCITS Peer Group was flat in August, leaving year-to-date returns close to +5% in USD terms. Performance in recent months was led by CTAs, which delivered impressive returns (+3.7% in August; +16.2% year-to-date as of September 3rd).

Considering the higher volatility of CTAs, the picture on a risk-adjusted basis is slightly different with L/S Credit leading the pack. It has an annualized Sharpe ratio of 6 so far this year (vs. 3.3 for Lyxor Global Peer Group).

"As we are head into Q4 2019, we turn more defensive. U.S. trade tariffs on USD 250bn of annual imports from China are set to increase to 30% from 25% starting October 1st," the report said.

Manufacturing new orders continue to signal a contraction and the Michigan survey signals an erosion in consumer confidence which might hurt private consumption, the last engi......................

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