The Lyxor Hedge Fund index was about flat during the past week, according to the latest weekly brief from the Lyxor Cross Asset Research Team.
Lyxor says that CTAs lagged with losses concentrating in their long US and Canadian bonds, in their long CAD, as well as in their short soft commodities, while moves in other strategies were mild.
L/S Equity funds’ losses in growth and tech positions were offset by gains in financials. Returns among L/S neutral funds were heterogeneous. Neutral fundamental outranked quantitative approaches, which were caught by factors rotation. Event Driven funds were supported by the catch-up in financials and in less crowded smaller caps, which offset some losses in healthcare positions.
Lyxor writes: “As the equity divergence with US rates continues to widen, the strength of the US economy and the persistence of downward inflationary pressures will take centre stage going forward. Were the Fed to be right in seeing only transitory inflation factors, US bonds could be vulnerable to a correction. Historically, when US yields spiked, the German Bund yield followed with an average 0.6 beta (a 0.7 beta when the European economic pulse outpaced that in the US). The below stress-test table reflects current Lyxor strategies’ sensitivity to a +100bps spike in global yields, all else equal.”
