Lyxor: Hedge Fund Index Gains As Euro Correction Drives Macro Moves

Oct 2 2017 | 10:07pm ET

Hedge funds gained ground last week as global macro funds gained on the euro’s pullback against the U.S. dollar, according to new research from Lyxor Asset Management. 

The company’s well-followed Lyxor Hedge Fund Index rose +0.2% for the week through September 26 (and +1.1% for September), the company reported in its latest Weekly Brief, bringing its year-to-date tally to +1.1%. 

The euro’s pullback was a “bonanza” for global macro managers during the week, Lyxor said, generating a +0.9% gain in its Global Macro Index. The measure has been under pressure all year, but booked +2.3% in September to narrow its YTD loss to -2.5%. 

Conversely, CTAs underperformed due to FX and equity positions, dipping -1.4% for the week and -2.6% for the month. Lyxor’s CTA Broad Index is the worst-performing of the group so far this year, down -3.7%. 

Lyxor’s Event-driven, Fixed-Income and L/S Equity measures were down -0.3% and 0.4%, respectively, for the week. For the year to date, Event-Driven leads the pack at +6.7%.

Companies most sensitive to tax and foreign earnings repatriation were back in full swing this week,” noted Lyxor Senior Strategist Philippe Ferreira in the research note. “These two developments reverberated in hedge funds. After nearly 4 weeks of rising rates…CTAs allocations materially changed. They have fully rebuilt very long European and U.S. bond exposures. They also strengthened gold positions and remain heavily short dollar especially vs. non-G10 FX. They are the most contrarian and are vulnerable to further rates and dollar appreciation.

“L/S Equity marginally suffered from the rotations out of growth and defensive into value and cyclical stocks,” he continued. “Those focusing on EM underperformed the most. In aggregate, L/S Equity are adding risks from reduced exposures. They are rebuilding positions in the US, in financials and consumer sectors especially. They are adding cyclical stocks in Europe at the expense of healthcare and resources. Japan exposures remained stable.

"Event Driven stand to gain the most from a tax cut package," Ferreira also wrote. 

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 August 31, 2017.

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