Most hedge fund strategies are in positive territory this month, with fixed income arbitrage, event-driven and L/S equity strategies are up in excess of 1 per cent so far, according to the latest Weekly Brief from Lyxor’s Cross Asset Research Team.
The Lyxor Event-Driven broad index is up 7 per cent year to date, with a balanced contribution from merger arbitrage and special situations. On the merger side, positions in the health care sector contributed to gains last week. On a negative note, CTAs gave back some gains last week and stand in the red month to date as a result of trend reversals in most asset classes, except equities. Meanwhile, L/S Equity market neutral funds, which are also sensitive to trend reversals, are down 1 per cent month to date.
Lyxor writes: “Going forward, we believe that robust economic conditions, US monetary policy normalization and expectations that the U.S. administration will soon move forward on fiscal reform will lead to higher bond yields in mature markets and lift the USD. In this environment, we maintain an overweight stance on Global Macro funds, a strategy that we upgraded back in June.
“Within the Global Macro strategy, we maintain a preference for multi-asset and EM funds compared to discretionary Fixed Income/ FX specialists. Both asset classes are likely to remain challenging to navigate as central banks remove accommodation. We also maintain Event-Driven and Fixed Income Arbitrage at overweight, while we are more defensive on L/S Equity and CTAs, both at neutral.”
