Lyxor: Hedge Fund Index Gains Again As Market Momentum Lifts CTAs

Oct 23 2017 | 6:13pm ET

Hedge funds gained again last week as rising equity markets and falling bond yields pushed strong performance at CTAs and global macro funds, according to new research from Lyxor Asset Management. 

The company’s Lyxor Hedge Fund Index gained +0.4% for the week through October 17, pushing its YTD tally to +2.9%. Directional strategies continue to outperform others, Lyxor noted in its Weekly Brief, due in part to a pervasive risk-on stance.

CTAs were the standout last week, gaining +1.7% on the strength of net long equity and fixed-income positions and broad momentum in financial markets. Indeed, , CTAs’ net positioning in equities, at 112% of net assets, is at a maximum since Lyxor began tracking data in early 2012. Under pressure for most of this year, the company’s CTA Broad Index is now just under breakeven at -0.7%.

The company’s Global Macro Index, which also suffered negative performance earlier this year, gained +0.4% for the week to also nearly eradicate its YTD loss, now at -0.4%. 

Dispersion in returns across macro managers continues to be significant, Lyxor said in the research piece.

“Our perspective on CTAs have improved and we upgraded the strategy last month from underweight to neutral,” said Lyxor Senior Strategist Philippe Ferreira in the research note. “Yet, we refrain from upgrading to overweight as a result of unstable trend-following conditions in asset classes such as fixed income and FX.”

“On top of that, the very long positioning of CTAs on fixed income is vulnerable to the rise in bond yields, which we expect due to factors such as buoyant economic activity, central bank normalization, and the increased likelihood of tax reform in the U.S.,” 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 $12.6 billion of assets under management and replicating $220 billion in AUM as of September 30, 2017.


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