The performance of broad hedge fund indices signal a sharp rebound of Special Situation strategies in January (+6.3 per cent), followed by L/S Equity strategies (+5.5 per cent), according to the latest Weekly Brief from Lyxor’s Cross Asset Research team.
The reason why they outperformed is related to their higher market beta and their bias towards cyclical sectors/ risk factors. Concurrently, CTAs were down 1.6 per cent in January due to their short equity positioning.
Lyxor writes: “If we take a longer perspective, there is only one strategy in positive territory since end of September: Merger Arbitrage. Yet, Special Situation strategies still managed to outperform L/S Equity (-0.2 per cent vs. -3.3 per cent).
“Recent developments are in line with our investment recommendations – a preference for Event- Driven (Overweight) vs. L/S Equity (Underweight). Within Event-Driven we prefer Merger Arbitrage (Overweight) to Special Situation strategies (Neutral).”
