Lxyor: Hedge Fund Index Down -0.8% On CTA, Macro Fund Weakness

May 30 2017 | 10:29pm ET

Hedge funds dropped last week as global macro and CTA funds ran into equity and energy market headwinds, according to the new research from Lyxor Asset Management. 

Lyxor’s widely followed Hedge Fund Index fell -0.8% for the week ended May 23, 2017, the company said in its latest Weekly Brief, bringing the measure’s YTD tally to +0.8%.

CTAs, which have enjoyed some strength recently following several weeks of underperformance, were hit by long allocations on equities and short positions on energy, Lyxor said, with the Lyxor CTA Broad Index falling -1.5%, returning its YTD loss to -2.8%.

Global macro funds, meanwhile, lost -1.1% as managers with European bias, through short EUR and duration and long equities, underperformed. Lyxor’s Global Macro Index is down -1% so far this year.

Elsewhere, the company’s Long/Short Equity Broad Index lost -0.6% to land +1.6% YTD, while Lyxor’s Fixed Income and Event Driven indexes were flat for the week and remain +5% and +2% for the year to date.  

“Stable economic trends, Fed caution and more reasonable reflation expectations suggest that a major equity downfall could be avoided,” said Lyxor senior strategist Philippe Ferreira in the research note. "Yet, rich U.S. equities seem vulnerable to a correction.”

“An unsustainable divergence between equities, rates and the dollar reflects recent mixed data [while] buying pressure is on the wane, away from Tech where the momentum might be getting stretched,” he added. “Past episodes of European economic catch-up have led to weaker correlations and better relative performance. However, when U.S. stocks start falling, European stocks rarely outperform.”

“While the current backdrop remains overall supportive for equities, more cautious positioning seems reasonable,” 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 $10.3 billion of assets under management and replicating $220 billion in AUM as of March 31, 2017.

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