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Alternative Market Briefing

Systematic Global Macro strategies appear to be more sensitive to equities than usual

Tuesday, January 07, 2020

Laxman Pai, Opalesque Asia:

In the hedge fund space, Lyxor believes that Global Macro and Merger Arbitrage strategies are the most appealing hedge against a worst-case scenario of renewed geopolitical tensions.

In Q2-15, such strategies outperformed while CTAs suffered a sharp drawdown, said Lyxor in its weekly brief.

Some factors might nonetheless lead to different outcomes for CTAs this time around as they already deleveraged fixed income portfolios.

"But we believe the outcome for Global Macro should be positive. Such strategies outperformed in December and in Q4 on the back of their short duration positioning and the rally in EM assets. Global Macro strategies ended the year at +7.4% according to our estimates. Going forward, we stay Neutral on such strategies, with a preference (O/W) for EM-focused ones," it said.

Systematic Macro strategies tend to be harder to model than Discretionary ones, it explained further.

The variables Lyxor uses in both linear models contribute to explain more than 70% of Discretionary Macro returns and less than 45% of Systematic Macro returns. And the gap is narrower than usual.

"In previous estimates, we struggled to explain more than 25% of Systematic Macro returns. At present, it turns out that Systematic Macro managers have significantly lifted exposure to equities, both in developed and emerging markets. The remaining variables are not statistically significant.," Lyxor said.

Bond market exposures do not a......................

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