While all hedge fund strategies were up last week, special situations outperformed as their cyclical and turnaround positions surged, according to Lyxor’s latest Weekly Hedge Find Brief.
CTAs’ strong long equity exposure meanwhile, offset losses in their short Euro and in their long Euro bonds.
By contrast, hedges and relative positioning in global macro and L/S equity funds capped the upside.
Lyxor’s cross asset research team writes: “Markets and hedge funds were also supported by an upbeat earning season. In Europe, the fading political risk benefitted most reporting companies, with less regards to their fundamentals. Stocks rose across the board, however, alpha generation was modest. We expect the stock-picking environment to improve as investors refocus on companies’ fundamentals and on the European recovery.
“In the US, in-line earning announcements no longer suffice to translate into meaningful stock performance. Expensive valuations and high Q1 earnings expectations are spurring more acute fundamental discrimination. In contrast with Europe, fund managers make do with more modest market contribution, but they benefit from better alpha prospects. This should support neutral US funds and longer bias L/S equity funds in Europe.”
