The Lyxor Global Hedge Fund index was up 1.1 per cent in September, taking year-to-date performance to +5.4 per cent.
Alternative strategies generally performed well in September as macroeconomic data came in better than expected and risk appetite continued to increase. Over most of the period, equity markets rallied and credit spreads tightened while the US dollar continued to weaken. These trends reversed at the end of the month on worse than expected data, but this was not enough to offset prior gains.
Long/short equity managers generally captured the broad market movement, with long bias managers benefiting most (+2.2 per cent). Variable bias and market neutral managers were flat (+0.2 per cent and -0.1 per cent, respectively), reflecting their lower net exposure to the market. Statistical arbitrage managers posted a one per cent gain.
Merger arbitrage and special situations managers performed well (+0.8 per cent and +1.6 per cent, respectively). Spreads on merger deals slowly tightened over the month. Several deals were completed, but merger arbitrage managers were able to add new positions toward the end of the month as new deals were announced. Special situations managers have gradually taken on more net equity and credit exposure as various restructuring plays have presented themselves; these positions generally gained over the month.
Long-term CTAs rose by one per cent, and short-term CTAs gained 1.9 per cent. Global equity markets (with the notable exception of Japan) trended upward strongly, and many CTAs captured these gains. On the other hand, funds with long positions in industrial metals or short positions in natural gas suffered on sharp moves in those products. Global macro funds were flat: market movements at the end of the month took away hard-earned gains from previous weeks. Global macro funds with substantial bearish positions on the US dollar benefited from the greenback’s persistent decline.
Convertible and volatility arbitrage managers continued their impressive run, up by 2.6 per cent. High yield bond spreads moved sharply tighter for most of the month, allowing funds invested in that space to gain more than their peers focused on investment grade names. Long/short credit funds benefited from similar bond dynamics, showing a 5.1 per cent gain. Fixed income arbitrage managers were flat this month (+0.2 per cent).
