Hedge fund strategies up in March, Lyxor says
French asset manager Lyxor said its Lyxor Hedge Fund Index was up 0.3% in March with 9 out of its 11 indices having ended the month in positive territory.
As last month’s best performers, Lyxor highlighted the Lyxor LS Equity Long Bias Index (+2.3%), the Lyxor Fixed Income Arbitrage Index (+2.1%), and the Lyxor Special Situations Index (+1.4%).
“Monetary meetings, minutes, and speeches continued to dominate market trends. The ECB and the Fed were more dovish than expected, boosting risky assets. A majority of hedge funds strategies delivered positive returns led by Fixed Income Arbitrage and the L/S Equity Long bias funds. The main drag in March came, for once, from the CTAs which lost on the oil rally and to some extent on bonds,” the company commented.
On the long short equity segment, long bias on value stocks have driven most funds outperformances but dispersion has been stressed in returns when the bias on value stocks was variable.
“Variable Japanese and European funds made do with a timid local rally compared to that unfolding in the US and in EM markets. Neutral funds benefitted from a pause in factor rotations.
“The sentiment among the US managers that we surveyed is improving. While still waiting for fundamental evidence to support the recent rally, they covered their short on energy stocks, they turned constructive on the consumer and the housing related sectors, and they reinforced their net exposure. Sentiment is much more mixed in Europe. Number of uncertainties keeps them cautious and reluctant to take bold stances,” Lyxor pointed out.
Event driven returns were rather driven by idiosyncratic developments, the company highlighted, while merger arbitrage strategies benefitted from various developments.
Regarding CTAs funds, Lyxor stressed substantial changes in their allocations in the aftermath of March’s losses.
“They reduced their long US bonds and turned short on the dollar. They still hold a small energy short, but built up longs in both base and precious metals,” Lyxor commented.
Global macro funds have shown dispersed returns and mixed and balanced exposures.
“Their long USD positions was a drag. By contrast, their longs in EM currencies were profitable. They have actively traded the March monetary catalysts, in particular through their bond exposures. They cut most of their long US bonds and maintained their modest short in European bonds,” Lyxor said.