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Alternative Market Briefing

Directional hedge fund strategies outperformed in August

Tuesday, September 01, 2020

Laxman Pai, Opalesque Asia:

Lyxor Peer Groups suggest hedge fund performance was up +0.5% in August, with CTAs underperforming (-1%) and Special Situations, Directional L/S Equity, Global Macro, and L/S Credit strategies outperforming (+0.6% to +1.6%).

In recent weeks, the rally in stock prices went uninterrupted, with the MSCI World up +5.3% in August (as of Aug. 25th), led by Technology and Consumer Discretionary stocks.

Directional hedge fund strategies outperformed as a result, with Special Situations and Directional L/S Equity up +1.6% during this period, said Lyxor.

Concurrently, low beta strategies such as CTAs, Market Neutral L/S, and Merger Arbitrage underperformed.

"The recent rise in bond yields had negative implications for some alternative strategies. CTAs underperformed in August, down -1% according to our estimates as of August 25th," Lyxor said.

The trend reversal in fixed income was somewhat smooth and has contributed towards limiting the damage for trend followers, who remain heavily long on fixed income.

Meanwhile, losses on fixed income were partially offset by long positions on equities and short positions on the USD which continued to experience downward pressures in August.

Since the beginning of the year, trend followers have further demonstrated their ability to adapt to fast-changing market conditions, allowing them to navigate the Covid-19 market turmoil remarkably well.

CTAs will probably manage to limit losses if the up......................

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