CTAs suffered from another trend reversal and underperformed last week, according the latest weekly brief from Lyxor’s Cross Asset Research team.
Lyxor writes: “From a top down perspective, we maintain an underweight stance on CTAs. In our view, the trend following environment remains unbalanced and too reliant on equity markets. At the other end of the spectrum, Fixed Income Arbitrage outperformed and Event-Driven was fairly resilient last week. For the full month of June, both strategies outperformed.
“Recently, on several occasions we expressed our strong conviction on Fixed Income Arbitrage. This is a strategy that performs well when bond yields and implied interest rate volatility rise. Thus, Fixed Income Arbitrage is attractive for diversifying long-only fixed income portfolios. We reiterate our overweight stance on the strategy. Meanwhile, Event-Driven benefitted in June from the outperformance of sectors such as health care and financials, which rank high in their portfolios.
“Health care stocks were probably fuelled by optimism over Republican-led efforts to replace Obamacare. The sector also benefitted from strong M&A activity in the US. We also maintain an overweight stance on Event-Driven.”
