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Alternative Market Briefing

Hedge fund performance up +1.1% so far in July: Lyxor

Tuesday, July 28, 2020

Laxman Pai, Opalesque Asia:

Lyxor Peer Groups suggest hedge fund performance was up +1.1% so far in July, with Market Neutral L/S underperforming (+0.4%) and Directional L/S Equity, Global Macro and L/S Credit strategies outperforming (+1.0% to +1.6%).

Every hedge fund strategy was up during the weekly period under review, said Lyxor in its weekly brief.

In recent weeks, market concerns over renewed COVID-19 infections in the U.S. and to a lower extent in Europe have not translated into profit-taking, with risk assets climbing higher on the back of additional stimulus talks by policymakers and substantial earnings surprises in the U.S. where the earnings season has started mid-July.

On a year-to-date basis, L/S Credit continues to outperform other hedge fund strategies (-0.3%).

Merger Arbitrage is one of the least volatile hedge fund strategy

Merger Arbitrage is typically an attractive alternative strategy to diversify portfolios. Its equity market beta is low, and volatility in returns is also contained.

"Our stance on the strategy remains constructive (Overweight) despite the recent dry up of M&A volumes in Q2 2020. However, we note that the environment for Merger Arbitrage strategies has improved," Lyxor said.

Over the long run, Merger Arbitrage strategies have demonstrated their diversification power. "Based on broad indices such as the HFRI, we note that the track record in bad times, when risk assets suffer large selloffs, is quite ou......................

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