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AII Barometer: Benefit from CTA’s diversification didn’t disappoint

The Lyxor Hedge Fund Index was down -2.3% in October (YTD -1.4%). 3 out of 12 Lyxor Indices ended the month of October in positive territory, led by the Lyxor CTA Short Term Index (+1.7%), the Lyxor Long Short Equity Market Neutral Index (+0.4%) and the Lyxor CTA Long Term Index (+0.1%).

Sentiment deteriorated rapidly as a marginal shift in the fragile balance between US reflationary dynamic and Eurozone deflationary forces raised doubts about global growth prospects. Moreover, the USD appreciation started to be considered as a growing threat for US activity. The unfolding of a virtuous reflationary cycle for the world economy seemed to have become less likely, which prompted investors to reposition portfolios. While a majority of strategies suffered, Event Driven funds were by far the main victims of the sudden flight to quality and liquidity. In contrast, CTAs were the main beneficiaries from the acceleration of the correction and the domino of themes gradually expressed over the month.

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