Event-Driven performance has continued to move upwards over recent weeks in a context where M&A activity has remained strong since the beginning of the year, especially in the U.S.
According to Dealogic, global M&A activity has reached USD 490bn year to date (YTD) as of March 3. Although global M&A volumes are slightly down compared to the same period last year (-7%), this is mainly related to lower dealmaking in Asia (-36%, including Japan).
M&A volumes are up 6% YTD in the U.S., to USD 221bn, led by the oil & gas and health
care sectors (up 300% and 62% respectively, see chart). Robust M&A activity in the U.S. is
supportive for Event Driven managers since they are predominately exposed to the region.
The largest proposed deal so far this year is the USD 31bn acquisition of Actelion by
Johnson & Johnson, which ranks first in Merger Arbitrage portfolios.
The Lyxor Event-Driven index is now up for the fifth consecutive week in a row, and has
outperformed other hedge fund strategies on a year to date basis. This is in line with our
expectations to the extent that we have had the strategy at overweight over recent
quarters. Going forward, we reaffirm our conviction that the strategy is due to perform well
this year. In particular, tax reform in the U.S. should translate into higher corporate activity
that would prove supportive for the strategy.
With regards to other hedge fund strategies, February was a strong month for CTAs. They
outperformed on the back of the rally in risk assets and commodities.
On a negative note,
some fixed income managers underperformed for the full month of February. More
recently, Global Macro underperformed last week due in part to their short positions on
European bonds as the Euro rebounded vs. the U.S. Dollar.
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