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Laxman Pai, Opalesque Asia: Several hedge fund strategies have momentum biases, in particular L/S Equity, and CTAs. Because this rotation took place in a bullish environment, most hedge fund strategies ended the week in positive territory, said Lyxor.
Directional L/S Equity (+1.2%) benefitted from their market beta, but alpha contributed negatively for all but those strategies with an explicit value bias. One strategy benefitted particularly from the changing market landscape: Special Situations (+3%). In relative terms, their higher market beta and value bias were supportive.
CTAs and Market Neutral L/S ended the week in negative territory but losses, in the range of -1% to -1.5% according to the Lyxor Peer Groups, were overall contained.
"Dispersion has been high within the Market Neutral L/S space, with 20% of our sample down over -3%, a significant loss for strategies which are traditionally low vol," Lyxor pointed out.
Most managers have now neutralized their factor biases to edge against further rotations into value stocks, the report said.
Hedge fund performance: Special Situations rides the value wave
Vaccine availability would be a game-changer for the global economy next year. In anticipation of such normalization, markets experienced strong moves last week. Special Situation strategies, which have a value bias, benefitted the most from the news.
In turn, Market Neutral L/S, which has a momentum bias, suffered from the factor ...................... To view our full article Click here
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