The Lyxor hedge fund index was up 0.5 per cent last week, with CTAs and global macro managers outperforming, according to Lyxor’s latest weekly brief.
Fixed income arbitrage managers also did well, in a context where rates implied volume has remained elevated since the Republican victory at the US election.
On a negative note, event driven underperformed. Positions on Rite Aid, a retail pharmacy chain targeted by Walgreens Boots Alliance, contributed negatively to performance on the back of anti-trust concerns.
According to Lyxor though, another mega merger in the pharma sector is set to boost event driven performance. Towards the end of the week, Johnson & Johnson announced a USD30 billion deal to acquire Actelion, a Swiss biotechnology firm, after months of stop-start negotiations. Actelion’s share price rallied 20 per cent in the wake of the announcement.
Lyxor writes that this is set to contribute significantly to event driven gains considering the fact that the Swiss company is the top long exposure of merger funds. However, the rally in Actelion’s share price falls out of the period under review in this report and is not reflected in the data.
“The corporate tax reform envisioned by the new US administration has been considered as an opportunity for both the technology and the pharma sector,” says Lyxor’s Philippe Ferreira. “They would benefit from tax breaks on cash repatriation. That could potentially extend the wave of M&A activity in these sectors. Event driven managers appear to be at the forefront to benefit from it.”
