The Lyxor Global Hedge Fund Index, an investable index based on Lyxor’s hedge funds platform which tracks the overall hedge fund universe, was down 0.8 per cent in November.
Year to date performance remains positive at 3.5 per cent.
Equities rallied strongly during the first week of November 2010, with the S&P 500 reaching the 2010 high.
Macro fears then set in and risky assets were marked down sharply. Equities gave back all of their gains, but purportedly safer assets did not prove to be a safe haven. Treasury bond yields rose sharply – whether they were issued by the US or by Germany.
The one market with strong trends was foreign exchange. The US dollar persistently gained against the euro as European debt concerns mounted, but the USD also trended upward against the Japanese yen. Tensions emanating from the Korean peninsula and fears of Chinese overtightening worked to drag down the yen.
The mid-month reversal of markets proved painful for trend-following CTAs, many of whom hold net long positions across a range of futures. The Lyxor CTA – Long-Term Index declined 2.4 per cent. Gains during the early part of November were more than offset by losses during the remainder of the month. The Lyxor CTA – Short-Term Index declined 2.0 per cent, bringing the index back into the red for the year at -0.9 per cent year-to-date.
The Lyxor Global Macro Index declined one per cent on the month, with the usual dispersion of managers across different styles. Managers with heavy equity weightings or more directional emerging market exposure fared worse than some of their peers.
Event driven managers displayed a variety of performances. The Lyxor Distressed Index gained 1.2 per cent, reflecting idiosyncratic drivers. The Lyxor Merger Arbitrage Index declined 1.1 per cent, with virtually all managers in that space down for the month on wider spreads. The Lyxor Special Situations Index gained 0.1 per cent. Managers who had previously bought protection on European sovereign debt performed quite strongly, but other managers bore the brunt of the sell-off.
The Lyxor Convertible Arbitrage Index continued its recent run, gaining 0.4 per cent on the month. The index has gained 4.2 per cent on the year. The Lyxor Fixed Income Arbitrage Index gained 0.8 per cent as managers in both the mortgage-backed space and the sovereign space found traction. The Lyxor L/S Credit Arbitrage Index managers struggled on the back of spread widening.
Equity-oriented managers generally had a modest month. A few specialties, such as Japanese equity markets or US small caps, were in favour, but broad markets produced little in the way of returns to beta. The Lyxor L/S Equity Long Bias Index gained 0.5 per cent, and the L/S Variable Bias Index lost 1.1 per cent. The L/S Equity Market Neutral Index declined 0.6 per cent, and the L/S Equity Statistical Arbitrage Index was flat.
