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It benefitted most hedge funds strategies. CTAs recouped part of their recent losses on
bonds. Global Macro funds’ gains on bonds were partially offset by losses in their long USD
crosses (which were reinforced in early March). Structurally long bias strategies captured a
favorable beta contribution. Finally, continued compression of credit and deal spreads
supported Credit and Merger strategies.
Since then, several hawkish statements, in contradiction with the outright dovish FOMC,
triggered a rebound in USD and a drag in most assets pegged to it.
This reversal is actually emphasizing growing nervousness regarding the current [fragile]
market equilibrium. Vanishing concerns about China and a dovish Fed were building blocks
of the rally (along with oil prices and improving US data). These fundamentals are well
priced in. Now, with technical factors gradually exhausting and a scarcity of near-term
monetary and economic catalysts, the focus might be shifting back to the macro wildcards
still on the table. There are many of them.
In that context, hedge fund strategies rebuilt their exposures to risky assets but remain
cautiously positioned (the Lyxor median equity beta snapped from 7% back to 15%, but
remains below 23% long term average). We too are keeping a balanced exposure. We aim
to capture directionality through tactical styles. Besides, we would exploit the elevated
asset dispersion with relative-value approaches, focusing on the ones least correlated to
the current themes.
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