The Lyxor CTA broad index underperformed last week, down 1.6 per cent with market neutral L/S Equity funds also in the red, according to Lyxor’s latest Weekly Brief.
Global macro, L/S equity and event driven strategies were resilient.
Fixed income arbitrage and L/S credit outperformed overall (+0.4 per cent), though some managers ended the week in the red as well.
Lyxor maintains a high degree of conviction on the ability of fixed income arbitrage and non-directional L/S credit strategies to deliver attractive returns in 2017.
Lyxor’s cross asset team writes: “Overall, it looks like investors are looking for reasons to take some profits. Healthcare reform is not per se a critical market theme. It is rather emblematic of the ability of Trump to unify the GOP and move forward in other areas such as tax reform. The rally over the recent quarters has taken place in a context of improving economic momentum, which continues unabated. March preliminary PMIs in Europe released this week were strong, above the previous print and above expectations.
“In the US, regional business surveys and consumer confidence surveys continue to signal healthy economic activity. But investors want a reality check after having bought hopes of reform and rising corporate earnings. In the short term, risk assets thus appear somewhat vulnerable and we downgrade CTAs from overweight to neutral as we feel uncomfortable with their very long equity stance. But beyond the near term window, we remain constructive on both risk assets and the ability of CTAs to deliver returns uncorrelated with traditional asset classes.”
