The Lyxor Hedge Fund Index was down 0.6 per cent last week according to the latest Weekly Brief from the firm’s Cross Asset Research Team.
Lyxor writes that: “Global Macro funds underperformed, though returns were dispersed. Though exposures to rates and equities usually cost, they recorded gains in FX. CTAs fared better with gains in short commodities, offsetting their losing long equity allocation.
“Event-Driven funds were resilient. Special Situations funds benefitted from their tilt to non-cyclical sectors. Their activist positions were also resilient: the presence of a fundamental catalyst helped weather the short- term volatility. Merger Arbitrage continued to benefit from several bidding wars. They remain under-invested and tend to favoor complex operations while remaining shy of the mainstream low-yielding deals.
“Beta was the main L/S Equity funds’ driver. The summer air-pocket overshadowed a strong US earnings season. Strong top-line growth and an elevated share of earning beats were not rewarded in markets. A majority of stocks headed down after their EPS announcement. Dominated by sector moves, stock differentiation was tame. The contribution from alpha was poor for US funds. Similar conditions also prevailed for Japanese managers. By contrast, the European season was weaker. Growth numbers were decent but did not surprise strongly, with a higher Euro and a cyclical peak driving revisions down. However, returns were more in-line with EPS announcements with notable single stock discrimination. Following a strong H1 and a recovery from the June factor rotation, managers are likely to reduce their exposure and lock in profits.”
