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Laxman Pai, Opalesque Asia: The rise in bond yields which started to take shape at the end of August accelerated in recent days and penalized CTAs' significant long bond positioning, said Lyxor in its weekly brief.
Meanwhile, recent political developments in the UK reduced the risk of a no-deal Brexit. The resulting appreciation of the GBP vs. USD was also harmful to CTAs, considering their short positioning.
Market Neutral L/S also tend to be sensitive to the momentum risk factor and a limited number of strategies suffered a severe drawdown.
The hit to L/S Equity strategies was nonetheless overall contained. In particular, Directional L/S Equity managers were fairly resilient, with the worst performers down in a range of -2/ -4%.
L/S Equity strategies were remarkably resilient
L/S Equity strategies were quite resilient in recent days despite the sector rotation which saw cyclical sectors, such as financials and materials, outperforming defensive sectors, such as utilities and consumer staples, within the MSCI World.
The Lyxor L/S Equity Directional Peer Group was up +0.3% last week. "We estimate the market beta of the strategy stabilized below 20% since May (based on a 3-months rolling regression of daily returns), which was particularly helpful in August,"Lyxor said.
More importantly, considering recent developments, such strategies appear to have significantly reduced their "style" biases over the recent quarters.
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