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Laxman Pai, Opalesque Asia: Hedge fund strategies were marginally impacted by Covid-19 headwinds, with the Lyxor Global UCITs Peer Group down -0.8% so far in September (as of September 25th).
The better performing strategies were defensive ones such as Merger Arbitrage and Market Neutral L/S. On the negative side, CTA strategies underperformed and were down -2.1%, Lyxor reported.
CTAs faced headwinds in September as trend reversals in the FX, commodity, and equity spaces were adverse. On top of the equity reversal which caught CTAs moderately on the long side, the fall in industrial and precious metals prices, as well as the rebound in the U.S. Dollar vs. the Euro, were a hurdle.
Meanwhile, CTAs had reduced their long exposure to fixed income and subsequently did not fully benefit from the modest rebound in bond prices.
However, the underperformance of CTAs is not new. Despite its remarkable resilience in Q1 (-0.9% according to the Lyxor CTA Peer Group) when the MSCI World fell -20%, the strategy lagged during the market rebound in Q2 and Q3.
"Our stance on the strategy remains Neutral considering the mixed trend following conditions," Lyxor said. Rich valuations across asset classes and central bank purchases could well lead to rangebound markets going forward.
Despite this, the strategy continues to bring portfolio diversification over the long run and its resilience during the brutal sell-off in Q1 was another illustration of its defensive fe...................... To view our full article Click here
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