Lyxor: Hedge Fund Index Gains 0.5% On Macro Strength

Apr 10 2017 | 7:18pm ET

Hedge funds edged minimally higher for the second straight week, according to Lyxor Asset Management’s latest Weekly Brief, as global macro managers benefitted from long-standing positions in U.S. dollar, energy, and European equity markets. 

The company’s widely followed Lyxor Hedge Fund index rose +0.5% for the week through April 4, the company said. Top of the table was Lyxor’s Global Macro Index, which gained +1% during the period to push YTD gains to +1.6%, while its CTA Broad Index again slipped, falling -0.2% for the week and leaving the quant-focused index down -1% so far this year. 

Lyxor’s L/S Equity Broad and Fixed Income Broad indexes each rose minimally, as European managers outperformed, relative value trades within consumer and financial sectors paid off, and a number of M&A deal positions bolstered returns of merger arbitrage managers. The two measures now sit +1.5% and +1.6% YTD, respectively, while the Event-Driven Broad Index leads the pack at +2.5%.

Hedge funds are displaying disparate stances on the approaching presidential election in France, Lyxor said in the research note. “Global Macro funds at Lyxor seem to be prudently positioned following the UK referendum and the U.S. election surprises, de-risking portfolios and favoring relative value trades,” wrote Lyxor senior strategist Philippe Ferreira. “Event Driven funds have marginally increased their European exposures since the end of 2016, although portfolio additions are company-specific, while non-European L/S funds have steadily increased their allocation to Europe over the last six months with little influence from trends in polls and largely playing the European recovery.” 

“European L/S managers have raised their net exposure by a third since the end of 2016, favoring cyclical sectors such as industrials, tech and materials, as well as small caps,” Ferreira added. “That is not to say that they shrug this risk-off. Since the end of January, when the election stress stepped up, they reduced financials and EU-domestic stocks. Additionally, they reinforced the defensive sectors and moved toward non-EU/EMU European markets [and have] maintained their short on indices futures implemented back in November 2016.”

Finally, Lyxor’s research shows CTAs seem to be more aggressively exposed to Europe. “Their long equities account for the bulk of their current directional exposure - a third of which in Europe - partially hedged by long Euro-bond, short EUR, and short U.S. duration,” Ferreira said.

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 $9.6 billion of assets under management and replicating $220 billion in AUM as of February 28, 2017.

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