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Laxman Pai, Opalesque Asia: In the space of alternative strategies, Global Macro and Event-Driven strategies rebounded the most since March 23rd, as market conditions improved in the wake of the aggressive Federal Reserve announcements to tame risks in the financial system.
Both Merger Arbitrage and Special Situations sub-strategies benefitted as M&A deal spreads tightened significantly since mid-March, Lyxor said in its weekly brief.
During the rebound, CTAs underperformed due to their defensive positioning. But their negative returns over the past few weeks were fairly limited (c. -0.5% per week) compared to the trend reversal in equity and energy markets.
"We focus below on the reasons why CTAs did well during the selloff and why they managed to contain the losses during the rebound, leaving it as the best performing strategy year-to-date (-1.3%) after a strong year in 2019 (+8.4%)," said Lyxor's Cross Asset Research Team.
CTAs navigated the market selloff remarkably well, thanks to long positions on a fixed income and defensive trades in commodity and FX markets.
Long precious vs. base metals and short energy trades were helpful within commodities as the OPEC+ disagreed on oil production cuts in the first half of March. Then, long USD positions were rewarding as funding shortages in USD during the market stress fueled the currency.
Finally, CTAs cut long equity positions as early as February, to a negligible or in some cases short stance o...................... To view our full article Click here
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