Hedge funds continue to climb higher, with the Lyxor HFI up 3.5% ytd (up to 24 March). The asset class was supported this week by L/S Equity, and in particular Asian managers that have done particularly well. Their successful stock-picking captured the buoyant market environment on the long book without losing much on the short book. Over the recent months, we have been advocating the benefits of Asian L/S managers for diversification purposes and continue to do so.
Head of Research – Managed Account Platform
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Hedge funds continue to climb higher, with the Lyxor HFI up 3.5% ytd (up to 24 March). The asset class was supported this week by L/S Equity, and in particular Asian managers that have done particularly well. Their successful stock-picking captured the buoyant market environment on the long book without losing much on the short book. Over the recent months, we have been advocating the benefits of Asian L/S managers for diversification purposes and continue to do so.
Meanwhile, Event Driven managers are up 1.3% month to date (up to 24 March). Investments in the consumer and communication sectors were the prominent contributors, on the back of the Vivendi saga amongst others. One hedge fund investor was reported to be advocating that the company should distribute € 9bn of special dividend and spinoff Universal Music, triggering a 5% rise of the stock price.
With regards to CTAs and Global Macro, they posted flat to negative performances in the wake of the 18 March FOMC meeting. The market interpreted the Fed stance as rather accommodative and, as a result, FX and commodity markets experienced trend reversals. The US dollar upsurge came to a halt and the commodity market regained colour, supported as well by geopolitical tensions in the Middle East. Short term CTAs outperformed despite the fact that they held similar positions to long term CTAs, but with less directionality. CTA losses on short commodity and long USD trades were compensated by gains on long equities and long fixed income positions. Overall, our CTA index is flat while our Global Macro index is down 0.3%.
Over the next few days, several FOMC members will be vocal on financial stability and monetary policy. Their stance will be closely monitored by market participants in order to get a clearer indication on the Fed intentions. The payroll report in the US may also lead to a reassessment of monetary policy expectations. In this environment, we have a preference for short and medium term CTAs and believe that Event Driven managers can continue to climb higher. Global Macro are favoured for their preference for European equities.
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