The Lyxor Hedge Fund index was up 1.0 per cent last week, fuelled by the recovery of Global Macro managers, according to the latest Weekly Brief from Lyxor’s Cross Asset Research team.
Lyxor writes that: “Global Macro funds continued to extend their winning streak, supported by their constructive views on Europe through long equities and short bonds. Short EUR versus USD was rewarding.
“L/S Equity managers also delivered solid returns last week. US managers thrived form their exposures to technology and consumer non-cyclical. European funds benefitted from their tilt toward cyclical.
“Special Situations outperformed on the back of successful activist investments and classic core positions. Sotheby’s, Trinity Industries and Tiffany&Co were among the winning trades.
“While 2015/16 proved challenging for active investors, 2017 is a much better vintage for the hedge fund industry. A number of factors contributed to improve their environment. First, markets movers were less speculative, with both quieter central banks and politics. As a result, assets traded closer to their fundamentals. Second, global growth pulled out of its anaemic pulse, spurring more directionality in a number of market segments. Third, economic divergences widened across regions, offering more relative opportunities. Fourth, more recently, several central banks confirmed they will start normalising their policies. This could lift a key barrier for alpha generation. Indeed, quantitative easing contributed to boost asset valuations across the board, while buffering the natural economic mechanisms. It reduced asset dispersion and crushed the economic volatility.
“This better backdrop helped hedge funds produce more sustainable alpha throughout the year. They rank favourably against most of their multi-strategy peers in risk-adjusted performance. Meanwhile, the diversification offered by hedge funds is regaining strength, with weakening correlation versus mainstream asset classes and across hedge fund strategies.”
