Lyxor Hedge Fund index goes flat in April

The Lyxor Hedge Fund index has recorded a flat performance of -0.02% in April, exhibiting resilience to disappointing macroeconomic trends.

Eight strategic indices out of 14 ended the month with a positive result, with good performances for Lyxor CTA Long Term (+1.04%), Lyxor L/S Equity Market Neutral (+0.7%) and Lyxor L/S Credit Arbitrage (+0.4%).

“Euro related fears resurfaced during the month. Mixed Italian and Spanish auctions at the start of the month and political uncertainty around elections in France, reignited sovereign risks. The economic surprise index, which had been trending down since the start of the year entered negative territory at the end of the month,” Lyxor said in a statement.

Credit-oriented Hedge funds proved to be resilient to the equity sell-off in April. The Lyxor L/S Credit Index posted a +0.4% performance. In a number of cases managers let positions roll off as target prices were hit or special situations such as tender offers paid off. Risks were therefore reduced as spreads tightened during the first quarter.

Meanwhile, strong dispersion among hedge fund returns continued.

“CTA managers, whether those focused on medium- and long-term trends, or those focused on shorter-term trends, displayed considerable dispersion within peer groups. The Lyxor Long- Term CTA Index gained 1.0%, with approximately a 10 percentage point difference between the top and bottom performers,” the company said.

One significant tailwind for outperforming managers was the long position in US Treasuries, which rallied as the yield declined roughly 20 basis points. The Short-Term CTA Index declined 0.5%.

Event driven strategies also exhibited substantial dispersion among managers. The Merger Arbitrage Index declined 0.4%. US-oriented managers were conservatively positioned and treaded water while European-oriented managers suffered as spreads in that region widened disproportionately.

“With concerns over the eurozone still high, managers generally adopted a more cautious stance: trading solely on fundamentals is not back yet. Investors too are seeking greater stability in their allocations without giving up too much return”, said Florence Barjou (pictured), senior portfolio manager and strategist at Lyxor.

 

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