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Alternative Market Briefing

Every hedge fund strategy was down in early October

Tuesday, October 15, 2019

Laxman Pai, Opalesque Asia:

October was off to a rocky start with all strategies delivering negative performances during the period under review (up to October 8th), Lyxor said in its Weekly Brief.

Global equities slid (MSCI World down -2.6%) as the ISM (Institute for Supply Management) report confirmed a further contraction of manufacturing activity. Therefore, equity sensitive strategies such as Special Situations and L/S Equity Directional suffered the most, down -0.7% and -0.5%, respectively.

On a better note, Merger Arbitrage strategies (-0.1%) managed to outperform as a result of their low beta against equities and also due to the tightening of deal spreads on some transactions such as the Allergan vs. AbbVie in the U.S. healthcare sector.

On a year-to-date basis, all strategies remain in positive territory

Systematic Macro managers have been positioned for a momentum reversal Systematic Macro strategies underperformed their Global Macro peers so far this year (+1.6% YTD vs. c. +5.5% for both Discretionary and EM Macro strategies).

For some managers, this was due to short fixed income positions while bond yields fell significantly. Meanwhile, long equity positions were built up in Q2, when trade tensions resurfaced. As geopolitical tensions eased, this positioning is more likely to be rewarded now.

"Based on linear regression, we estimate however that such strategies have in aggregate a long duration bias (bottom-up evidence for some blue-ch......................

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