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Weekly Brief: Hedge funds have limited direct exposure to Greece

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In this issue, we present the Lyxor platform’s direct exposure to Greek assets, as well as the Lyxor hedge fund strategies exposures to European assets – most likely to be impacted by a spillover effect, either way.


Philippe Ferreira

Head of Research – Managed Account Platform

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In this issue, we present the Lyxor platform’s direct exposure to Greek assets, as well as the Lyxor hedge fund strategies exposures to European assets – most likely to be impacted by a spillover effect, either way.

For months the Greek risk premium remained mainly contained to local assets, financials, and periphery spreads. Since the end of May, the Greek wildcard got more seriously factored and triggered a derisking out of European markets. A stream of failed meetings, accelerating deposit outflows, and now capital controls opened the door to uncharted waters, including Grexit.

With pressing deadlines now at hand (referendum on July 5), negotiations have been halted for now. The probability that a deal might be reached in the next few days is very slim and this has resulted in a substantial repricing of the Greek and more broadly peripheral risk premium. In our opinion, uncertainty over Greece will persist for months but the contagion effects are likely to be contained to the extent that the issue is properly ring-fenced.

As of today, 11 funds in the Lyxor platform hold direct exposure to Greek securities – and these are fairly limited. Besides, all strategies are holding exposures to European assets. Lyxor hedge funds strategies allocate on average 14% of their NAV to European assets (equities, bonds and FX altogether). In summary, the Lyxor platform’s exposure to Greek developments seems to be moderate and reasonably hedged.

We are not changing our recommendations on alternatives which, we believe, are suited to current market conditions: Slight OW long term CTAs, Slight UW L/S Credit; Neutral Event Driven; Strong OW L/S Equity Market Neutral.

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