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Poor average performance among equity long/short UCITS in 2016

Monday, February 13, 2017
Opalesque Industry Update - ML Capital has published its Q1 2017 Alternative UCITS Barometer, a focused quarterly survey analysing the current demand trends of Alternative UCITS allocators in the market today, which provides some insight into the momentum for alternative asset managers in the UCITS space.

Key Highlights:

Equity Long/Short Disappointments - For 2016, analysts had their bets for strong performance on their Equity Long/Short holdings but markets defied all forecasts. The difficulties have been attributed to numerous factors such as the surprising outcome of the Brexit and Trump vote, rallying markets including record highs of the S&P500, the impact of a prolonged rate hike and yield favouring equity markets, that made it challenging to capture alpha. Within the Global UCITS Alternative Index, the Equity Long/Short component was down -4.08%, which provides further evidence of poor average performance across this strategy. Many investors are more hopeful that this year, Equity Long/Short can provide good returns as correlations begin to breakdown.

Exiting Emerging Markets - For Q1 2017, the strategies receiving the greatest outflows are within Emerging Markets (Global Emerging, Pan-Asia and Latin America). 50% of investors are reducing their holdings that are exposed to the LatAm region as trade and movement agreements are yet to be determined with the US. Additionally, Trump's fiscal agenda and proposed protectionist policies combined with tighter monetary policy could have a negative impact on EM.

More Macro & CTAs - Despite a tricky year for CTAs, Macro and CTA strategies continue to receive large inflows as investors seek to mitigate risk within their portfolios and achieve returns through rising or falling markets. Additionally, many predict there to be large macro opportunities in 2017 with changing political agendas and diverging European and US monetary policy.

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