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This week was uneventful for most hedge fund strategies amid low trading volumes, few
market catalysts and limited changes in risk assets’ prices. The Lyxor Hedge Fund index
was flat. Merger Arbitrage and Global Macro funds were the two exceptions.
The former outperformed on Pfizer beating out Sanofi in the take-over of Medivation in the
oncology segment. Several managers were already positioned for a bidding war on this
company.
By contrast, Macro funds’ shorts on U.S. bonds and longs on USD temporarily played out
adversely. Shifting perceptions on the timing of the Fed’s next rate hike ahead of the
central bankers’ annual Jackson Hole meeting generated some volatility in rates and
currencies. Expectations on further easing programs from the ECB and the BoJ were also
mildly revised down.
Hedge Funds modestly increased risk over the course of the summer, though
heterogeneously across strategies. While September seasonality has statistically been
supportive for risk assets, hedge funds remain conservatively positioned.
The lack of decisive market trends and uncertainty about the mood of investors as they
head back from their summer break will not last indefinitely. Market movers will quickly
reemerge as we head into September.
The tone from Jackson Hole, the U.S. jobs report, and the big three meetings (ECB, BoJ
and Fed) will be closely monitored. Additionally, the G20 summit, key Chinese economic
releases, and the first U.S. presidential debate at the end of September are on the radar.
They are likely to generate more trading opportunities for hedge funds.
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