Lxyor: Hedge Fund Index Gains 0.4% As Risk-On Environment Continues

Feb 28 2017 | 7:14pm ET

Hedge funds were broadly positive last week on a continued risk-on environment and supportive trends in international equities, European bonds and currency movements.

The Lyxor Hedge Fund Index gained 0.4% in the week through February 21, the company reported in its most recent Weekly Brief, and all five substrategies posted positive results for the period. For the year to date, Lyxor’s benchmark index is up 1.5% heading into the final month of the first quarter – a significant improvement on last year's comparable period. 

Lyxor’s CTA Broad Index was the top performer for the third straight week, gaining 0.9% to bring its month-to-date gains to 4%. CTAs continue to be supported by their long equity and commodity exposure, Lyxor said, with particular tailwinds from U.S. and Asia ex-Japan equity and long European bond positions.

The company’s Global Macro Index gained +0.2% thanks largely to significant longs on USD crosses. Although the weakest performer of the bunch for the week, Global Macro is also perfoming much better than in the final months of last year, and sits up 2.2% for the month to date and 1.3% so far in 2017. 

Elsewhere, L/S Equity gained +0.4% driven by variable bias funds, while Event Driven and Fixed Income measures gained 0.3% and 0.4%, respectively. Fixed Income and L/S Credit thrived on the back of credit spread tightening, Lyxor said, while the firm’s Event Driven Broad Index continues to show the top YTD gain at 2%. 

In comparison, the MSCI World Index is up 4.1% so far this year as risk assets have continued to edge higher over the recent weeks. The S&P 500 (price index) is now up 5.7% year to date and the equity rally has pushed valuations further into stretched territory, Lyxor wrote. 

“Going forward, we believe some profit taking makes sense on directional strategies after the recent rally,” said Lyxor senior strategist Philippe Ferreira in the research note. “We nonetheless maintain our strong conviction on Event Driven and U.S. L/S Equity strategies. 

“We believe U.S. tax reform should support alpha generation for stock pickers. Meanwhile, both strategies provide protection if political risk in Europe continues to rise,” he added. 

Lyxor’s Weekly Brief aims to identify trends in hedge fund investing while leveraging the proprietary information accessible through the company’s managed account platform.

Lyxor’s Hedge Fund indices are based on the universe of funds available on the platform determined on a monthly basis to be eligible for inclusion. Participating funds represent $8.3 billion of assets under management and replicating $220 billion in AUM as of December 30, 2016.

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