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Alternative Market Briefing

Hedge fund performance up +1%, L/S Credit and Global Macro strategies outperform

Tuesday, June 16, 2020

Laxman Pai, Opalesque Asia:

Hedge fund performance was up +1% so far in June, according to Lyxor Peer Groups. The period under review (up to June 9th) excludes the most recent trading days which saw renewed market volatility.

The report said that L/S Credit and Global Macro strategies outperformed so far in June, on the back of the rebound of EM assets and the tightening of high yield credit spreads.

Meanwhile, CTA strategies continued to underperform due to the rebound in risk assets (including energy) and the rise in bond yields.

"Our stance remains constructive on Event-Driven and Fixed Income Arbitrage strategies, Neutral on CTA and Global Macro, and defensive on L/S Equity, particularly Market Neutral L/S strategies," Lyxor said.

Merger Arbitrage managers remain cautious

Despite some green shoots, both dealmakers and Merger Arbitrage managers remain cautious. Deal spreads were volatile in May, as transactions such as Tiffany vs. LVMH and Delphi Technologies vs. BorgWarner entered a period of uncertainty.

Expectations have been confounded by deal breaks, which occurred in May for transactions trading at low spreads (Texas Capital vs. Independent Bank; Front Yard Residential vs. Amherst Holdings).

Concurrently, some deals trading at wide spreads completed in the energy sector in April (i.e. Tallgrass energy vs. a consortium led by Blackstone).

After having experienced a sharp rebound in April, Merger Arbitrage strategies were flat in Ma......................

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