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Last week Lyxor Cross Asset Research team addressed the positive performance of CTA strategies during the
market downturn, which started a few weeks ago and dragged global equities nearly -6% lower in May. This fact is
nonetheless debatable since other benchmarks, such as the SG Trend Index, have reported a negative
performance in May.
EM-focused Global Macro strategies also outperformed other hedge fund strategies since the beginning of the
market turmoil. They managed to deliver slightly positive returns in May according to the Lyxor UCITS Peer Group.
Our views on EM-focused Global Macro strategies has been constructive (Overweight) during the last quarter.
They reflect our stance on EM Sovereign Credit, which assumes that sovereign bond yields would remain low for
longer in developed markets and higher yielding assets such as High Yield and EM Credit would be attractive in
relative terms. The accommodative stance on major central banks has proved to be supportive. EM Sovereign
Bonds in hard currency have experienced six consecutive months in positive territory according to the EMBI Global
Diversified Index.
Beyond the Fed tailwind for EM-Macro strategies, research on active vs. passive investing also shows that EM
Fixed Income is the segment where active investing shows the best results. More than 48% of active managers
outperformed their benchmark on average between 2001 and 2018 (compared to only 33% in the U.S. fixed income
space) according to S&P. Dispersion across EM issuers tends to be large and active investors who managed to
avoid exposures to the usual suspects such as Argentina, Turkey and Venezuela were rewarded.
Finally, with regards to hedge fund performance, most strategies were flat across the board at the turn of the month.
L/S Credit, Merger Arbitrage and Market Neutral L/S were up +0.1% last week. Concurrently, Directional L/S Equity
strategies were down -0.2%. Markets were buoyed by the dovish stance of the Federal Reserve, as investors
expect aggressive Fed rate cuts could offset the trade war headwind. During the period under review (May 28th to
June 4th), the MSCI World was nonetheless down -0.5%.
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