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Laxman Pai, Opalesque Asia: Hedge fund strategies operating in the most dislocated market segments or displaying the greatest pricing anomalies have rebounded strongly, in particular, the Merger Arbitrage and L/S Credit strategies, said Lyxor in its weekly brief.
Strategies with the longest market bias, including L/S Directional, Special Situations, and Global Macro, also did well.
"Lyxor's L/S Equity Neutral peer group was down -2.8% year-to-date, hurt by extreme trading conditions and the constituents' average market beta of 20%," it said.
Investor optimism is rebuilding, boosted by the emerging impact from the massive monetary and fiscal announced stimulus, from article hopes concerning the Gilead drug. Prospects of a restart of the U.S. and European economies also helped.
Notwithstanding the challenging market conditions, L/S Neutral strategies benefitted from mitigating factors.
Unsurprisingly, they recorded positive contributions from their short books, even though short-selling was less profitable than in previous bear markets for reasons detailed in the following section.
Neutral strategies' elevated holding diversification also helped mitigate the surging stock correlation risk.
Additionally, while volatility and dispersion across quantitative factors surged, their pairwise correlation remained moderate, allowing neutral strategies to navigate some of the obvious sector rotations (underperformance of consumer discretionary, energy, fi...................... To view our full article Click here
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