Hedge Funds ended February on a good note (+0.8%), confirming the positive momentum witnessed since the start of the year. As of the end of February, the Lyxor Hedge Fund Index is up 2.2% year to date, with 80% of the funds in positive territory.
Head of Research – Managed Account Platform
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Hedge Funds ended February on a good note (+0.8%), confirming the positive momentum witnessed since the start of the year. As of the end of February, the Lyxor Hedge Fund Index is up 2.2% year to date, with 80% of the funds in positive territory.
The CTA rally, which started in May 2014, showed signs of fatigue. Managers suffered from trend reversals in oil prices and US rates that impacted markets throughout the month. CTAs still managed to end the month flat as all assets were eventually correctly aligned during the last week of February (+3.6% last week). As such, some questions remain regarding their ability to outperform in the near term as the US bond market rally seems to get closer to an end.
Meanwhile, in a reversal of previous trends which saw Event Driven managers underperforming in Q4-14, Event Driven strategies outperformed in February, up 2.2%. Such monthly performance is a record over the past 18 months. Event driven managers benefited from a conducive risk appetite environment (VIX down 4% in February), combined with a series of positive deal developments such as Valeant announcing the acquisition of Salix as well as Shire PLC successfully closing its acquisition of NPS Pharmaceuticals.
The last minute resolution of the Greek crisis had a positive impact on European markets. With this issue out of the picture for now, all was set for QE to unleash its full potential. As a result equities continued to rally, with the Eurostoxx50 now up 13% year-to-date while credit spreads tightened. On the Fixed Income side, while sovereign yields have never been so low, appetite for government and corporate bonds in Europe kept growing (see p2), a positive for our European Credit managers.
On the other side of the Atlantic, the positive momentum appeared to be running out of steam. While unemployment numbers are still supportive, other economic indicators started to disappoint (see p2), confirming the more positive investor sentiment towards Europe in 2015. Surprisingly on the L/S Equity side US funds managed to outperform their European peers on the back of a more aggressive positioning.
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