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Alternative Market Briefing

CTAs down -2.6% in September due to long positioning on fixed income

Monday, October 21, 2019

Laxman Pai, Opalesque Asia:

CTAs were down -2.6% in September due to their long positioning on fixed income, while Global Macro strategies were up +1.4%, Lyxor said.

Concurrently, Event-Driven and L/S Credit strategies were slightly up (+0.2 and +0.3% respectively) and L/S Equity strategies were flat.

Yet, the dispersion within L/S Equity strategies was higher than usual in September due to sector rotations.

Yet, as of early Q4, the rise in bond yields and the sector rotation in equities appears to be behind us.

CTAs rebounded at the turn of the quarter. The rebound in value stocks proved to be short-lived and we stay cautious on this risk factor at this stage of the business cycle.

Despite the escalation of trade tensions during the third quarter, economic activity has remained quite resilient, Lyxor explained.

"Macro data releases even managed to beat expectations in the U.S. and Japan, leading to a sudden rise in bond yields throughout September. This movement had important implications in equity markets. It translated into a rebound in value stocks and a reversal in momentum stocks," it said.

"Going forward, our stance remains defensive on equities (U/W) on the back of the global industrial slowdown, geopolitical risks and the challenging earnings season which is about to start in the U.S," Lyxor stated.

"In the space of alternative strategies, we have a preference for Market Neutral L/S vs. Directional L/S and we stay constructive on directio......................

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