Lyxor: Hedge Funds Gain 0.3% As Key Catalysts Loom

Jun 6 2016 | 11:04pm ET

Hedge funds remained broadly defensive ahead of key announcements this week, according to the latest edition of Lyxor Asset Management’s Weekly Brief

The Lyxor Hedge Fund Index gained 0.3% for the week ended May 31, further narrowing its year-to-date loss to -2.3%. As with last week, four of Lyxor’s subsstrategies were in the green, with macro managers outperforming +0.4% on the strength of the rebound in global equity indices and the renewed appreciation of the dollar. L/S equity funds posted strong returns, also up 0.4%, with Variable Bias and Long Bias managers leading the pack. CTAs underperformed again, although the segment broke even for the period as gains on the fixed income bucket offset losses due to equity exposure.

“Hedge funds are definitely not adding risk in portfolios ahead of key announcements in June that may disrupt market conditions,” noted senior strategist Philippe Ferreira in a statement. “The Brexit referendum ranks first amongst near term potential disruptors and several European L/S Equity managers have decided to downsize significantly their exposure to UK assets ahead of the vote. 

“The mid-June FOMC meeting and the associated summary of economic projections will also be closely monitored amidst signals that US economic activity accelerated in Q2,” he continued. 

As a result of such near term uncertainties, Lyxor’s research shows the median equity beta of hedge funds on the company’s platform remained below 20% during the last week of May, and edged lower for strategies such as CTAs, Global Macro and Multistrategy.

“We maintain the preference for strategies that limit the exposure to market directionality,” added Ferreira. “We prefer merger arbitrage to special situations, prefer market neutral and variable biased L/S to long-biased managers. We also remain overweight CTAs in the midterm, although tactically we advise a neutral stance.”

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. Approximately 62 funds participate, representing $8 billion of assets under management and replicating $241 billion in AUM.

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