Lyxor: Hedge Funds Rebound as Volatility Lessens

May 27 2015 | 1:07pm ET

Hedge funds have recovered some ground since the first week of May, according to Lyxor Asset Management’s weekly briefing.

After a stumble at the beginning of the month, all hedge fund strategies tracked by the Lyxor Hedge Fund Index were in the green for the period May 12 through May 19.

The Lyxor Hedge Fund Index gained 0.9%, driven by a 1.2% gain in Long/Short Equity strategies. Despite remaining down 0.2% for the month so far, the index is now up 3.3% year to date. 

“Earlier in May, the higher volatility regime exhibited by several asset classes impacted hedge funds negatively,” noted Lyxor head of research Philippe Ferreira. “L/S Equity continued to outperform its peers,” he added. 

The report noted that all Long/Short equity managers tracked by Lyxor, with the exception of one short-biased fund, were in positive territory for the week. L/S Equity remains the best performing strategy YTD, with 50% of funds tracked by Lyxor above 4% and several above 10% so far this year.

CTAs recovered somewhat during the period, gaining 1% to bring the month-to-date tally to -6.4%. For the year to date, CTAs are now in the green, albeit barely, up +0.6%. Managers generated alpha primarily from equity and fixed income strategies, while FX was mixed and commodities remained negative, the report said.

Event-driven strategies gained 0.7%, continuing several strong weeks. Special situations outperformed merger arbitrage. Lyxor noted that more than 80% of the managers in its Event Driven sample were positive month-to-date and half up in excess of 4%.

Convertible arbitrate gained 1.1%, outperforming the 0.3% booked by Lyxor’s broader Fixed Income Broad Index. Conversely, Long/Short Credit arbitrage underperformed, gaining only 0.1%.

Looking forward, Ferreira noted that dovish comments from the ECB have pushed the dollar higher against the euro and commodities lower. If such developments continue, they will induce the Fed to hike rates in September. This will result in an even higher dollar, which would have negative implications for emerging markets.

The Lyxor Hedge Fund indices are based on the universe of funds available on the Lyxor Managed Account Platform determined on a monthly basis to be eligible for inclusion. Approximately 80 funds participate on the platform, representing $7.1 billion of assets under management and replicating $200 billion in AUM.

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