Lyxor: Hedge Fund Index Flat For 2017 As Event-Driven, Equity Strategies Shine

Jul 24 2017 | 4:02pm ET

Hedge funds were flat again last week as gains in event-driven, L/S Equity and CTA funds were offset by a decline in Global Macro strategies, according to Lxyor Asset Management’s latest research. 

The company’s Lyxor Hedge Fund Index returned exactly 0.0% for the week through July 18, Lyxor said in its most recent Weekly Brief. In what is very likely to be a very uncommon occurrence this late in an annual cycle, the index’s month-to-date and year-to-date returns are also 0.0%. 

CTAs edged higher last week, gaining 0.5% as gains in equities and fixed income were in line with their positioning. The strategy remains short USD, in particular against EM currencies as well as EUR, and remains down -3.9% YTD. Event-Driven strategies also extended their winning streak last week on the back of positions in the technology, consumer non cyclical and communications sectors, gaining 0.7% to push YTD gains to 6.3%. Global Macro, conversely, lost 0.5% due to headwinds related to the rise of the EUR versus the dollar and the underperformance of European stocks. Global Macro is now down -3.6% for the year so far. 

A rising tide lifts all boats, Lyxor noted in the research note, observing how the sharp outperformance of technology stocks lifted the S&P 500 to new records last week, which in turn drove the MSCI World index to new records. The market developments have had significant implications for hedge fund performance, Lyxor said, as Event-Driven and L/S Equity exposure to technology stocks helps explain why both strategies outperformed last week. 

“Going forward, we maintain an overweight stance on Event-Driven and Fixed Income Arbitrage,” added Lyxor senior strategist Philippe Ferreira in the note. “We also reiterate the overweight stance on EM focused macro managers. In parallel, we advise an underweight stance on CTAs and L/S Equity market neutral strategies and have L/S Equity and L/S Credit at neutral.”

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 $12 billion of assets under management and replicating $220 billion in AUM as of June 30, 2017.

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