The Lyxor Hedge Fund Index continued its recovery in October advancing +2.3 per cent, with six out of nine of Lyxor’s indices recording strong results.
CTAs were the primary beneficiaries of the momentum in global equities. They also thrived from their long allocations in EU bonds and energy.
Variable L/S Equity and Event Driven funds also delivered strong results, while quant funds lagged amid record low volatility and reduced factor differentiation. Their reinforced sector neutrality also deprived them from the strong pulse in momentum and high beta.
“Higher stock dispersion in most regions and low correlations are positive for alpha. But constraints remain, highlighted by the earning season,” says Jean-Baptiste Berthon (pictured), Senior cross-asset strategist, Lyxor Asset Management. “US company reports were robust but didn’t spur enthusiasm. A positive surprise rarely meant positive return: a challenge for long-biased stock-pickers. We favour deep value funds. In Europe, reports were weaker but better welcome, as investors priced in economic traction. Yet, stock differentiation was modest, with returns largely driven by broader markets: easier to perform, more difficult to beat benchmarks. We favour long-biased funds. Conditions were better in Japan, with stock returns better reflecting the quality of earnings.”
